Becoming one’s boss is a dream that many have. After all, working for yourself means you can control your hours, workload, and sometimes, even your pay.
One way to go about this is to establish a business. However, this can be a complicated venture, especially if you consider the process of registering your business, marketing it, and making sure that it is profitable.
Individuals who want to avoid the hassle and expense of business registration can always take the freelancing route. Below is a guide for aspiring freelancers, including information regarding freelance tax in the Philippines.
What Is Freelancing?
The Basics of Freelance Work
Freelancing is defined as a way of working without a long-term commitment to an employer. This type of work arrangement involves a set rate given upon the completion of specific projects. Before starting the project, the client and freelancer must discuss the workload, time frame, and pay.
In most cases, freelancing allows individuals to work on multiple jobs simultaneously. However, this is provided that they accomplish all of them with quality and the deadline in mind.
Freelance Jobs That Are in Demand
There is a growing demand for freelancers in various industries since hiring a freelancer is more practical and often more cost-effective for temporary or project-based tasks.
Newly self-employed individuals have an easier time finding listings for freelance work thanks to the modern internet. Some highly sought-after skills include machine learning (ML), data analytics, and video production.
Many businesses also opt for freelance work in marketing, making content writing, search engine optimization, and web design popular choices.
Of course, these are just a few examples since freelancers can offer any skill or service as long as there is a demand for it.
Advantages of Becoming a Self-Employed Worker
It’s well-known that freelancers can control their time and workload, but freelancing has more to offer. For one, you can decide on your rates depending on your skills and expertise. Clients may want to negotiate, but you have the final say.
In addition, self-employed individuals aren’t confined to an office space. You can work at home or anywhere else as long as you have a reliable internet connection and the necessary tools to complete your projects.
Lastly, freelancers can pursue projects that interest them, meaning they can work in different industries. This can lead to a more well-rounded portfolio and, eventually, more work opportunities.
Do Freelancers Pay Taxes?
“Do freelancers pay taxes?” is a commonly asked question by those new to self-employment. The answer is yes, and the process can be daunting if you are used to an employer handling your taxes for you.
The following sections cover the basics of freelance taxes in the Philippines, including registration and exemptions.
Freelance Tax Registration
All self-employed individuals in the Philippines must register with the Bureau of Internal Revenue (BIR) to get their tax identification numbers (TIN). This process requires you to submit the following items to avoid any delays:
- BIR Form 1901
- BIR Payment Form 0605
- NSO Birth Certificate
- Community Tax Certificate
- Barangay Certificate
- Client Contract
Do note that you must pay an annual fee of 500 pesos for registration. The regional or district office to visit must cover your home address if you don’t have a set place of work.
Aside from the TIN, freelancers also need BIR Official Receipts (ORs) to operate, which you can acquire after submitting BIR Form 1906 and clear samples of invoices, among other things.
Freelance Tax Exemptions
Self-employed individuals are obligated to pay freelance tax in the Philippines, but there are circumstances in which you may be exempted.
Let’s say you leave the country during the taxable year. No matter the reason, be it for leisure or work, you won’t be required to pay your taxes in that given time frame.
Another instance is when you are considered a non-resident alien, meaning that you don’t have citizenship in the Philippines and that you don’t have a permanent home or domicile in the country.
You may also be eligible for freelance tax exemption if you’re earning minimum wage or have an annual salary of 250,000 pesos or less.
Dates To Remember When Paying Freelance Tax
Punctuality is of utter importance when paying freelance tax in the Philippines. The BIR imposes penalties for late payments, such as interest on your current tax and even imprisonment for a certain period. Knowing this, you best take note of the following tax deadlines for freelancers:
- Monthly Percentage Tax – Due Every 20th of the Month
- Quarterly Income Tax – Due Every 15th of April, August, and November
- Annual and Last Quarter Payment of Income Tax – Due Every 15th of April
Freelancers need to submit BIR Form 2551M for monthly percentage tax. On the other hand, the quarterly income tax requires BIR Form 1701Q. Lastly, the annual and last quarter payment of income tax is filed with BIR Form 1701. All three deadlines necessitate BIR Form 0605.
It would be wise to have constant reminders for freelance tax deadlines in the Philippines since they can help you avoid penalties. In addition, keeping track of your taxes can also help you get deductions and other benefits come tax season.
Why Do You Need a Labor Lawyer as a Freelancer in the Philippines?
Tax for freelancers can be overwhelming, especially for those just starting their journeys in self-employment. Still, it is a crucial part of the gig economy, and it’s essential to be knowledgeable about it to avoid penalties.
Aside from researching freelancing on your own, you can also work with labor lawyers, given that they are knowledgeable about freelance tax in the Philippines. In fact, our team at Yap, Kung, Ching & Associates Law Office can assist you with more than your taxes.
We offer aid in constructing contracts for your clients, ensuring that both parties are protected in case of any disputes. We can also help you with work permits and visas if you plan to take on foreign clients.
For more information about our services, please don’t hesitate to contact us.
Freelancing is a path explored by many in recent times. It’s a venture that allows you to control your time, projects, and income. However, as with any job, it comes with specific responsibilities— one of which is paying your taxes.
In the Philippines, freelancers are obliged to pay freelance tax, a percentage of their total income earned in a year. There are also deadlines that need to be met to avoid interest and penalties.
If you wish to learn more about freelance tax in the Philippines or need assistance with other legal concerns, reach out to us at Yap, Kung, Ching & Associates Law Office. We would be more than happy to help you out.