Bureau of Internal Revenue
The Freelancer's Guide to BIR Registration
January 27, 2016
When you think about taxes, it kind of gives you an uncomfortable feeling. Not even the thought of our hard-earned money being used for "good" can ease up the pain we feel inside when we see those deductions on our payslip. Unfortunately, we can't avoid this predicament because, as citizens of this country, it is mandatory to pay taxes. Filing your income tax won't be a problem if you work in a company, human resource will be the one who'll take care of them for you. But it's a different case for freelancers, or self-employed individuals because they will have to do the filing work themselves. Wait. Freelancers need to pay taxes? But, of course. Freelancers, like any other business, must be registered with the Bureau of Internal Revenue (BIR). It is stated in Section 74 in the Philippine Tax Code that if an individual is receiving income from sources within or outside the Philippines, they are required to pay taxes. Freelancers often don't know that they need to register their freelance gig with the BIR, others, however, do but chose to intentionally evade the obligation. Regardless of whether you’re a part-time or a full-time freelancer, if you have income, you will be taxed! BIR defines the self-employed as:
- Persons engaged in business and who derive their personal income from such business;
- Professionals such as (1) "persons who derive their income practicing their profession" like lawyers, and those registered with the Professional Regulation Commission (PRC) such as doctors, dentists, certified public accountants, and others; and (2) those "who pursue an art and make their living therefrom," including writers, athletes, and others. Freelancers and home-based service providers also fall under professionals
1. What do I need to prepare?
- NSO birth certificate
- Photocopy of mayor’s business permit , if applicable
- DTI certificate of business name, if applicable
- PRC ID, if applicable
- Occupational Tax Receipt (OTR) or Professional Tax Receipt (PTR), if applicable
- Marriage contract, if applicable
- Contract/company certification, if applicable
- Affidavit indicating the rates, manner of billings, and the factors considered in determining service fees (as specified in BIR Revenue Regulation 4-2014)
- Other necessary requirements
2. How do I register my services/business?It'll be easier to obtain an application for registration if you already have a Tax Identification Number or TIN. You can easily secure one via BIR website or the BIR portal free of charge.
- Accomplish BIR Form 1901 and submit together with the documentary requirements to the revenue district offices (RDO) having jurisdiction over the place of business.
- Pay the annual registration fee (P500.00) at BIR or any authorized agent banks (AABs) of the concerned RDO.
- Submit all of your documents. Make sure they’re complete and that you have the right number of photocopies.
- Pay the P15 certification fee and the P15 documentary stamp tax. A form will be given, which the taxpayer will be attaching to the registration certificate later on.
- Attend the taxpayer’s initial briefing to be conducted by the RDO for new registrants in order to advise them of their rights and duties/responsibilities.
- The RDO shall then issue the Certificate of Registration (Form 2303) together with the “Ask for Receipt” notice, Authority to Print (ATP) and Books of Accounts.
- Submit requirements for ATP and registration of books of accounts (journal/ledger/subsidiary professional income book and subsidiary purchases/expenses book) and have them stamped by the same RDO.
3. How do I know if I am subject to 12% VAT?With your business or freelance gig, BIR will require you to pay business taxes regardless if you’re earning or not. Remember: Your tax deductions are based from the gross receipts or sales and not on your net income.
- Businesses with gross receipts and sales that exceed Php1,919,500 are liable for 12% value added tax (VAT) while 3% percentage tax is required from your gross receipts if it doesn’t exceed that amount.
- For these taxes, you must file BIR Form 2550M (VAT) and BIR Form 2551M (percentage tax) on the 20th and 25th month following the applicable month respectively.