How to Pay Taxes and Get an ITR if You’re a Freelancer: An Ultimate Guide


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Do freelancers pay taxes in the Philippines? How much tax should I pay as a freelancer? How can freelancers get an ITR?

These and more questions often prop up in online and offline discussions. Many Pinoy freelancers barely have an idea about filing and paying taxes because existing rules are not as clear-cut as those for other types of taxpayers such as employees and corporations.

Still, it’s a good measure to know what taxes you owe the government. Read on to learn the basics of taxation for freelancers in the Philippines.

READ: An Ultimate Guide to Philippine Tax: Types, Computations, and Filing Procedures

 

Do Filipino freelancers need to pay tax?

Yes, freelancers are required to pay income tax regardless if they’re working part-time or full-time for clients in the Philippines or abroad. Home-based workers who make money online (such as web developers, writers, SEO specialists, and graphic designers) are included.

Filipino freelancers with overseas clients are exempted from paying taxes in the Philippines—only if they’re already paying taxes in the foreign country where their earnings come from. So if your income from overseas is not taxed abroad, then you’re liable to pay income tax in the Philippines.

The confusion about whether freelancers should pay income tax or not comes from the fact that the National Internal Revenue Code (also called the Tax Code) does not explicitly mention “freelancers.”

Even so, freelancers can be classified either as self-employed individuals or mixed-income earners depending on the nature of work or business. Self-employed and mixed-income individuals in the Philippines are all required to file and pay income tax.

 

How do you register as a freelancer in the Philippines?

Like other taxpayers in the country, freelancers are required to register with the BIR (either as a self-employed individual or mixed-income earner) and get a Taxpayer Identification Number or TIN (for those who don’t have one yet). However, the specific requirements and procedures are different from other types of taxpayers.

BIR registration is the first step you must take before you can file and pay freelance taxes in the Philippines.

BIR registration steps for freelancers.

  1. Prepare all the requirements for BIR registration.
  2. Apply for an RDO transfer using the BIR Form 1905 if you’re previously employed. Request to transfer your registration records from your former employer’s RDO to the RDO where you’ll register as a freelancer (the RDO having jurisdiction over your place of business or residence). Wait for up to 10 working days until your RDO transfer takes effect before you proceed with the next step.
  3. Go to your new RDO and file your application for BIR registration using the BIR Form 1901.

Related: How to Register with BIR as a Self-Employed/Mixed-Income Individual: A Guide to BIR Form 1901

 

What taxes do freelancers need to file and pay?

Once you’re registered with the BIR, take note of the different taxes (mostly income taxes and business taxes) you must file and pay. You can find this information in the BIR Form 2303 (Certificate of Registration) issued to you when you applied for BIR registration.

1. Annual registration fee.

  • Rate: Php 500/year
  • Who are required to pay: All self-employed and mixed-income individuals
  • Form to file: BIR Form 0605 – Payment Form
  • Deadline: January 31 of every year

 

2. Quarterly income tax.

  • Rate: 3% of net sales (gross sales or receipts for the applicable quarter less allowable deductions)
  • Who are required to file and pay: All self-employed and mixed-income individuals
  • Form to file: BIR Form 1701Q – Quarterly Income Tax Return
  • Deadlines: May 15 (first quarter), August 15 (second quarter), and November 15 (third quarter) of the current year

 

3. Annual income tax (tax payment for the last quarter of the taxable year).

 

4. Quarterly percentage tax.

  • Amount: 3% of gross sales and/or receipts
  • Who are required to file and pay: Self-employed and mixed-income individuals whose gross annual sales and/or receipts do not exceed Php 3 million and who are not VAT-registered
  • Who are exempted: Self-employed individuals availing of the 8% preferential tax rate
  • Form to file: BIR Form 2551Q – Quarterly Percentage Tax Return
  • Deadlines: April 25 (first quarter), July 25 (second quarter), October 25 (third quarter), and January 25 (fourth quarter)

 

5. Monthly value-added tax.

  • Rate: 12% of gross receipts
  • Who are required to file and pay: Self-employed and mixed-income individuals whose gross annual sales and/or receipts exceed Php 3 million
  • Who are exempted: Self-employed individuals availing of the 8% preferential tax rate
  • Form to file: BIR Form 2550M – Monthly Value-Added Tax Declaration
  • Deadline: 20th day of the following month

Note: Starting in 2023, filing and payment of VAT returns will be done only every quarter. Monthly filing of VAT will no longer be required.

 

6. Quarterly value-added tax.

  • Rate: 12% of gross receipts
  • Who are required to file and pay: Self-employed and mixed-income individuals whose gross annual sales and/or receipts exceed Php 3 million
  • Who are exempted: Self-employed individuals availing of the 8% preferential tax rate
  • Form to file: BIR Form 2550Q – Quarterly Value-Added Tax Return
  • Deadline: 25th day of the month following each taxable quarter

 

7. Expanded/Creditable withholding tax.

  • Rate: 1% to 15% of gross income
  • Who are required to file and pay: Self-employed and mixed-income individuals whose income is subject to expanded withholding tax (e.g., professional fees, talent fees, rental income, etc.)
  • Form to file: BIR Form 1601-EQ – Quarterly Remittance Return of Creditable Income Taxes Withheld (Expanded)
  • Deadlines: April 30 (first quarter), July 31 (second quarter), October 31 (third quarter), and January 31 (fourth quarter)

 

How can freelancers get an ITR?

Even if they don’t have employers who issue a BIR Form 2316, freelancers can secure an ITR on their own.

Simply file the appropriate ITR with the BIR. It’s BIR Form 1701 for self-employed individuals availing of the itemized deduction under the graduated income tax rates and mixed-income earners. For self-employed individuals availing of the 8% tax rate or optional standard deduction under the graduated tax rates, the correct form to file is BIR Form 1701A.

Related: What is the difference between BIR Form 1701 and BIR Form 1701A? Which ITR should I use?

After filing and paying your income tax, the BIR will issue a stamped and validated copy of your ITR to you. This serves as your proof of income tax filing and payment for the applicable year.

 

Frequently Asked Questions.

1. How can I compute my income tax?

2. What is the difference between BIR Form 1701 and BIR Form 1701A? Which ITR should I use?

3. Should I file income tax under the 8% special rate or the graduated rates?

4. I’m availing of the graduated tax rates. Which should I choose: itemized deduction or optional standard deduction?

5. I’m a freelancer. How can I get a copy of my ITR?

 

About the Author.

Venus Zoleta is an experienced writer and editor for nearly 15 years, covering topics on personal finance, travel, government services, and digital marketing. Her background is in journalism and public relations. In her early 20s, she started investing and purchased a home. Now, she advocates financial literacy for Filipinos and shares her knowledge online. When she’s not working, Venus bonds with her pet cats and plans her next travel adventure.

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4 thoughts on “How to Pay Taxes and Get an ITR if You’re a Freelancer: An Ultimate Guide

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