Complete BIR Taxation Guide for Self-Employed & Freelancers

Last Updated on – Jun 30, 2021 @ 5:53 am

As a freelancer myself, I get the occasional question from friends and relatives: How do you pay for taxes? Fortunately, with this guide I can simply tell them, “Here’s the link, read everything!”

Kidding aside, there are tons of freelancers out there scratching their heads asking the what, where, when, and how to fulfill their BIR tax responsibilities.

Their questions inspired our team at Grit PH to come up with this comprehensive guide of all the stuff freelancers need to know about managing their BIR tax in the Philippines.

Post Contents:

What is the Bureau of Internal Revenue (BIR) and What Does It Do?

The Bureau of Internal Revenue (BIR) is the government body under the Department of Finance that collects taxes and enforces tax laws. Its powers and duties include the following:

  • Reduction and collection of all internal revenue taxes, fees, and charges
  • Enforcement of all forfeitures, penalties, and fines connected therewith, including the execution of judgments in all cases decided in its favor by the Court of Tax Appeals and the ordinary courts
  • Administration of supervisory and police powers conferred to it by the National Internal Revenue Code and special laws. 

Types of Taxes in the Philippines

There is an assortment of taxes that we pay as citizens of our country. While most of us are familiar with Value-Added Tax (VAT) or Income Tax, there are many other forms of taxes that we only realize exist when we’re required to pay.

Here’s a list of some of the taxes collected by the government.

1. Capital Gains Tax is a tax imposed on the gains presumed to have been realized by the seller from the sale, exchange, or other disposition of capital assets located in the Philippines, including pacto de retro sales and other forms of conditional sale.

2. Documentary Stamp Tax is a tax on documents, instruments, loan agreements and papers evidencing the acceptance, assignment, sale or transfer of an obligation, rights, or property incident thereto.

3. Donor’s Tax is a tax on a donation or gift and is imposed on the gratuitous transfer of property between two or more persons who are living at the time of the transfer.

4. Estate Tax is a tax on the right of the deceased person to transmit his/her estate to his/her lawful heirs and beneficiaries at the time of death and on certain transfers which are made by law as equivalent to testamentary disposition.

5. Income Tax is a tax on all yearly profits arising from property, profession, trades or offices or as a tax on a person’s income, emoluments, profits and the like.

6. Percentage Tax is a business tax imposed on persons or entities who sell or lease goods, properties or services in the course of trade or business whose gross annual sales or receipts do not exceed P550,000 and are not VAT-registered.

7. Value-Added Tax is a business tax imposed and collected from the seller in the course of trade or business on every sale of properties (real or personal) lease of goods or properties (real or personal) or vendors of services. It is an indirect tax, thus, it can be passed on to the buyer.

8. Withholding Tax on Compensation is the tax withheld from individuals receiving purely compensation income.

9. Expanded Withholding Tax is a kind of withholding tax which is prescribed only for certain payors and is creditable against the income tax due of the payee for the taxable quarter year.

10. Final Withholding Tax is a kind of withholding tax which is prescribed only for certain payors and is not creditable against the income tax due of the payee for the taxable year. Income Tax withheld constitutes the full and final payment of the Income Tax due from the payee on the said income.

11. Withholding Tax on Government Money Payments is the withholding tax withheld by government offices and instrumentalities, including government-owned or -controlled corporations and local government units, before making any payments to private individuals, corporations, partnerships and/or associations.

What is the TRAIN Law and What are its Effects?

The Tax Reform for Acceleration and Inclusion, or TRAIN, is the first package of the Comprehensive Tax Reform Program (CTRP).

It is a recently passed tax reform law with the goal of creating a more just, simple, and effective system of tax collection.

Following the constitution, it aims to redistribute tax-paid benefits by creating a system wherein richer citizens will have larger contributions and poorer citizens benefit more from government programs and services.

TRAIN aims to fund the following:

  1. Education
  2. Healthcare Services
  3. Infrastructure Programs

As a result of TRAIN, many things have changed: new taxes have been introduced, some existing taxes either been raised or lowered, and new rules for exemptions have been implemented.

Here’s a list of some of the things that have changed now that TRAIN is in effect.

1. New Personal Income Tax Rates

Personal income tax rates will be lowered. Salaried employees earning an annual income of P250,000 or below will be exempted from paying income taxes.

2. Lower Tax Rates for Professionals

Self-employed professionals can expect to pay lower taxes because of reduced tax rates for professionals.

3. Tax on 13th Month Pay and Other Bonuses

The threshold for tax exemption on 13th month pay and other bonuses received by salaried employees has been raised from P82,000 to P90,000. As a result, 13th month pay and bonuses paid to employees that amount to P90,000 or below will not be taxed.

4. Tax on Drinks using Sugar and Caloric / Non-Caloric Sweeteners

Beverages that use sugar and other sweeteners are now taxed. These include soft drinks and other cola drinks, fruit juices, and powdered drinks.

5. Tax Exemption of milk, 3-in-1 coffee, medicines for diabetes, etc.

Exempted from the sugar tax are milk, 3-in-1 coffee, 100% natural fruit juice or vegetable juice, medically-indicated beverages, and drinks and beverages that use natural sweeteners such as coco sugar or stevia.

Drugs and medicines prescribed for diabetes, high cholesterol, or hypertension are also exempted from the 12% VAT.

6. Taxes on LPG, Diesel, Gasoline, and other fuel products

7. Taxes on Cars and Automobiles

8. Tax on Coal

9. Tax on Tobacco Products

10. Donor’s Tax

11. Estate Tax

Estate tax, or tax levied on the properties or estate of lawful heirs and beneficiaries inherited from a deceased person, will now be subject to a flat rate of 6% on the amount in excess of P5 million.

Estates with a net value of P5 million and below will be exempted from paying the estate tax. Family homes valued at P10 million or less will also be exempted from estate tax.

12. Tax on Cosmetic Surgery and other Aesthetic Procedures

A new 5% tax on cosmetic surgeries, aesthetic procedures, and body enhancements has been implemented

13. Documentary Stamp Tax

The documentary stamp tax charged for some legal or business transactions has doubled from P1.50 to P3.00.

12. Stock Transaction Tax

13. Foreign Currency Interest Income Tax

The tax on interest income on foreign currency deposits was raised from 7.5% to 15%.

Tax Exemptions:

With all the changes, one of the things you’ll want to know right away is if you qualify for any of the new rules on tax exemptions.

Remember, even if you are exempt from paying income tax, this does not necessarily mean that you don’t have to file your income tax returns!

Check out our list below and make sure you know where you qualify and what you have to do in order to pay your taxes correctly.

Who are Required to File Income Tax Returns?

Individuals:

  • Resident citizens receiving income from sources within or outside the Philippines
  • Employees deriving purely compensation income from two or more employers, concurrently or successively at any time during the taxable year
  • Employees deriving purely compensation income regardless of the amount, whether from a single or several employers during the calendar year, the income tax of which has not been withheld correctly (i.e. tax due is not equal to the tax withheld) resulting to collectible or refundable return
  • Self-employed individuals receiving income from the conduct of trade or business and/or practice of profession
  • Individuals deriving mixed income, i.e., compensation income and income from the conduct of trade or business and/or practice of profession
  • Individuals deriving other non-business, non-professional related income in addition to compensation income not otherwise subject to a final tax
  • Individuals receiving purely compensation income from a single employer, although the income of which has been correctly withheld, but whose spouse is not entitled to substituted filing
  • Non-resident citizens receiving income from sources within the Philippines
  • Aliens, whether resident or not, receiving income from sources within the Philippines

Non-Individuals:

  • Corporations including partnerships, no matter how created or organized.
  • Domestic corporations receiving income from sources within and outside the Philippines
  • Foreign corporations receiving income from sources within the Philippines
  • Estates and trusts engaged in trade or business

Who are not required to file Income Tax returns?

  1. An individual earning purely compensation income whose taxable income does not exceed P250,000.00
  2. An individual whose income tax has been withheld correctly by his employer, provided that such individual has only one employer for the taxable year
  3. An individual whose sole income has been subjected to final withholding tax or who is exempt from income tax pursuant to the Tax Code and other special laws.
  4. An individual who is a minimum wage earner
  5. Those who qualify under “substituted filing.” However, substituted filing applies only if all of the following requirements are present:
    • The employee received purely compensation income (regardless of amount) during the taxable year;
    • The employee received the income from only one employer in the Philippines during the taxable year;
    • The amount of tax due from the employee at the end of the year equals the amount of tax withheld by the employer;
    • The employee’s spouse also complies with all 3 conditions stated above;
    • The employer filed the annual information return (BIR Form No. 1604-CF); and
    • The employer issued BIR Form No. 2316 (Oct 2002 ENCS version) to each employee.

Who are exempted from Income Tax?

1. Income from abroad of a non-resident citizen who is:

  • A citizen of the Philippines who establishes to the satisfaction of the Commissioner the fact of his physical presence abroad with a definite intention to reside therein
  • A citizen of the Philippines who leaves the Philippines during the taxable year to reside abroad, either as an immigrant or for employment on a permanent basis
  • A citizen of the Philippines who works and derives income from abroad and whose employment thereat requires him to be physically present abroad most of the time during the taxable year
  • A citizen who has been previously considered as a non-resident citizen and who arrives in the Philippines at any time during the year to reside permanently in the Philippines will likewise be treated as a non-resident citizen during the taxable year in which he arrives in the Philippines, with respect to his income derived from sources abroad until the date of his arrival in the Philippines.

2. Overseas Filipino Workers, including Overseas Seamen

An individual citizen of the Philippines who is working and deriving income from abroad as an overseas Filipino worker is taxable only on income from sources within the Philippines.

Provided, that a seaman who is a citizen of the Philippines and who receives compensation for services rendered abroad as a member of the complement of a vessel engaged exclusively in international trade will be treated as an overseas Filipino worker.

Note: A Filipino employed as Philippine Embassy/Consulate service personnel of the Philippine Embassy/consulate is not treated as a non-resident citizen; hence, their income is taxable.

  1. General Professional Partnership
  2. Government Service Insurance System (GSIS)
  3. Social Security System (SSS)
  4. Philippine Health Insurance Corporation (PHIC)
  5. Local Water Districts (LWD)

Do Freelancers Need to Pay Tax [Under the TRAIN Law]?

So how does TRAIN affect freelancers and self-employed taxpayers? Freelancers still need to pay tax, but there are changes on how you pay your taxes, and how much you’ll be required to pay.

Under certain conditions, you may even be exempt. Here are some of the changes that directly affect freelancers.

First off, there will be no more monthly filing of percentage tax. Instead, filing percentage tax is now quarterly. According to the BIR TRAIN tax advisory dated February 8th, 2018:

“All taxpayers subject to percentage tax pursuant to Section 116 of the Tax Code and those who will be subject thereto due to change of registration from VAT to Non-VAT, are required to pay the percentage tax on a quarterly basis using BIR Form No. 2551Q.

There is no need to file and pay monthly percentage tax on their monthly gross receipts using BIR Form No. 2551M.”

Second, tax rates are now an option for eligible individuals. According to the BIR TRAIN supplemental tax advisory dated February 19th, 2018:

“Self-employed individuals and/or professionals with gross sales and/or receipts and other non-operating income that do not exceed the above amount (VAT exemption amount of Php 3,000,000.00) have the option to avail of the eight percent (8%) income tax on gross sales or receipts and other non-operating income in lieu of the graduated income tax rates and percentage tax.

These taxpayers who avail of this option have to accomplish BIR form No. 1905 (registration update) to effect the end date for their VAT or percentage tax, and as such, they are not required to file quarterly percentage tax.”

In terms of tax exemptions, taxpayers with an annual income of less than P250,000 are exempt from paying income taxes.

However, freelancers who earn more than P250,000 must pay income tax based on the graduated tax table, as well as an additional 3% percentage tax. If a freelancer’s annual revenues exceed P3,000,000, they must also pay 12% Value-Added Tax.

What’s the Impact of the TRAIN Law on Take-Home Pay?

If it’s still somewhat confusing, don’t worry. Here’s a breakdown of how TRAIN will affect how much money you take home at the end of the day.

First off, you’ll get to enjoy a higher take-home pay.

Previously, tax rates ranged from 5% to 32%, depending on the tax bracket you were in.

But now that TRAIN has been implemented, income tax rates have been lowered, and you’re exempted from paying personal income tax if you earn less than P250,000 every year.

This tax exemption also includes 13th-month pay and other bonuses, which means less taxes to pay and more money to take home.

Here’s a breakdown of how that works:

  • Individuals with an annual salary of P250,000 or below will no longer pay income tax.
  • Individuals with an annual salary between P250,000 and P400,000 per year will be charged with an income tax rate of 20% on the excess over P250,000.
  • Individuals with an annual salary between P400,000 and P800,000 will pay a fixed amount of P30,000 plus 25% of the excess over P400,000.

Overall, you can break down how tax rates will be implemented into two groups:

BIR Tax Tables:

If annual gross sales or income is P3 Million or below:

Self-employed and professionals with an annual income not exceeding the VAT threshold of P3,000,000 have the option to choose between these two tax rates:

  1. 8% of gross sales or receipts and other income, in excess of P250,000 instead of the graduated income tax rates and percentage tax (no option to register for VAT); OR
  2. Graduated income tax rates of 0% to 35% on net taxable income, plus 3% percentage tax (No change in computation of Net Taxable Business Income)

This 8% withholding tax rate replaces the two-tier rate of 10% (for self-employed and professionals earning less than P720,000 income every year) or 15% (for those earning more than P720,000 per year).

The 8% withholding rate is applied on income, regardless of the amount.

These are the payments made to self-employed individuals that are subject to 8%:

  • Professional fees, talent fees, commissions, etc. for services rendered by individuals;
  • lncome distribution to beneficiaries of Estates and Trusts;
  • lncome Payment to certain brokers and agents;
  • lncome Payments to partners of general professional partnership;
  • Professional fees paid to medical practitioners; and
  • Commission of independent and/or exclusive sales representatives, and marketing agents of companies.”

If annual gross sales or income is above P3 Million:

Self-employed individuals with an annual income of more than P3 million must follow the graduated income tax rates on the net taxable income, plus VAT.

Here are some tables that help explain what income tax you can expect to pay for each tax bracket under TRAIN:

TRAIN Income Tax Table [For 2018 – 2022]Under the approved TRAIN Tax Law
Annual IncomeTax Rate
P250,000 and belowNone (0%)
>P250,000 – P400,00020% of excess over P250,000
> P400,000 – P800,000P30,000 + 25% of excess over P400,000
>P800,000 – P2,000,000P130,000 + 30% of excess over P800,000
>P2,000,000 – P8,000,000P490,000 + 32% of excess over P2 million
Above P8,000,000P2.41 million + 35% of excess over P8M

Income Tax Rates in the Philippines [Starting Year 2023]Under the approved Tax Reform Bill
Annual IncomeTax Rate
P250,000 and belowNone (0%)
>P250,000 – P400,00015% of excess over P250,000
>P400,000 – P800,000P22,500 + 20% of excess over P400,000
>P800,000 – P2,000,000P102,500 + 25% of excess over P800,000
>P2,000,000 – P8,000,000P402,500 + 30% of excess over P2 million
Above P8,000,000P2.2025 million + 35% of excess over P8 million

Monthly SalaryMonthly Tax [2017]Monthly Tax in 2018 (Under Tax Reform)Additional Take-Home Pay Per Month (Under 2018 Tax Reform)
P10,000620.090620.09
P15,0001,541.8301,541.83
P20,0002,683.8402,683.84
P25,0003,918.22634.573,283.65
P30,0005,353.531,624.573,728.96
P35,0006,853.532,655.724,197.81
P40,0008,331.033,886.974,444.06
P45,0009,831.035,136.974,694.06
P50,00011,391.986,386.975,005.01
P55,00012,991.987,636.975,355.01
P60,00014,591.988,886.975,705.01
P65,00016,191.9810,136.976,055.01
P70,00017,791.9811,497.696,294.29
P75,00019,391.9812,997.696,394.29
P80,00020,991.9814,497.696,494.29
P85,00022,671.9815,997.696,674.29
P90,00024,405.3217,497.696,907.63
P95,00026,138.6519,122.697,015.96
P100,00027,871.9820,747.697,124.29
P105,00029,605.3222,372.697,232.63
P110,00031,338.6523,997.697,340.96
P115,00033,071.9825,622.697,449.29
P120,00034,805.3227,247.697,557.63
P125,00036,538.6528,872.697,665.96
P130,00038,271.9830,497.697,774.29
P135,00040,005.3232,122.697,882.63
P140,00041,738.6533,747.697,990.96
P145,00043,471.9835,372.698,099.29
P150,00045,205.3236,997.698,207.63
P155,00046,938.6538,622.698,315.96
P160,00048,671.9840,247.698,424.29
P165,00050,405.3241,941.988,463.34
P170,00052,138.6543,675.328,463.33
P175,00053,871.9845,408.658,463.33
P180,00055,605.3247,141.988,463.34
P185,00057,338.6548,875.328,463.33
P190,00059,071.9850,608.658,463.33
P195,00060,805.3252,341.988,463.34
P200,00062,538.6554,075.328,463.33
P205,00064,271.9855,808.658,463.33
P210,00066,005.3257,541.988,463.34
P215,00067,738.6559,275.328,463.33
P220,00069,471.9861,008.658,463.33
P225,00071,205.3262,741.988,463.34
P230,00072,938.6564,475.328,463.33
P235,00074,671.9866,208.658,463.33
P240,00076,405.3267,941.988,463.34
P245,00078,138.6569,675.328,463.33
P250,00079,871.9871,408.658,463.33

Withholding Tax Calculator

If you’re still confused or a little lost, you can use these Withholding Tax calculators to get a rough idea of how much taxes you’ll owe starting 2018 with your current salary.

To Estimate the Impact of the TRAIN Law on Compensation Income

If you want to compare how the TRAIN Law affects your compensation income, you can use these tax calculators.

What is a TIN and What is it For?

A Taxpayer Identification Number or TIN is an identification number used by the BIR to identify individuals or entities who are paying taxes.

By law, any person, whether natural or juridical, required under the authority of the Internal Revenue Code to make, render or file a return, statement or other documents, is required to have a TIN and use it in the return, statement, or document to be filed with the BIR.

Each person or entity should only have one TIN. Using more than one TIN is a criminal offense punishable by a fine and imprisonment.

Who can apply for a TIN?

Here’s a list of individuals and entities who can secure their own TIN:

  1. Self-employed and  mixed-income individuals
  2. Individuals or employees earning purely compensation income
  3. Corporations, partnerships, including government agencies and instrumentalities (GAI), Local Government Units (LGUs)
  4. One time taxpayers with no previously issued TIN
  5. Persons registering under Executive Order 98 (those securing TIN to transact with government offices.
  6. Estates and trusts
  7. Non-resident citizens/Overseas Contract Workers/Seamen earning purely foreign-sourced income

Getting Your TIN For the First Time

Here’s how you can get your own TIN. Below are the documents required for the different individuals/entities that can register a TIN.

Requirements for Self-Employed and Mixed-Income Individuals:

  1. Filled-up BIR Form 1901
  2. Photocopy of Mayor’s Permit, or duly received Application for Business Permit if still on process
  3. NSO Birth Certificate
  4. Marriage Contract (if applicable)
  5. Professional Regulation Commission ID (if applicable)
  6. Occupational Tax Receipt or Professional Tax Receipt
  7. Contract or Company Certificate of Employment
  8. Other documents which may include the following, if applicable:
    • Contract of Lease
    • DTI Certificate of Registration for Business Name
    • Proof of registration/permit to operate from economic development authorities
    • Franchise agreement
    • Sworn statement of capital
    • Working permit for non-resident
    • Waiver of husband to claim additional exemption
    • NSO Birth Certificate of declared dependents

Requirements for Individuals Earning Purely Compensation Income:

  1. Filled-up BIR Form 1902
  2. NSO Birth Certificate or any valid ID bearing applicant’s complete name, birth date and signature
  3. Certificate of Employment
  4. Marriage Contract (if applicable)

Requirements for Corporations and Partnerships (including GOCCs, GAI, and LGUs):

  1. Filled-up BIR Form 1903
  2. Certificate of Registration issued by the Securities and Exchange Commission (SEC); articles of incorporation/partnership
  3. Mayor’s Permit
  4. Other documents which may include the following, if applicable:
    • Contract of lease
    • Certificate of authority if Barangay Micro Business Enterprise registered
    • Franchise agreement
    • License to do business in the Philippines, if a resident foreign corporation
    • Proof of registration from economic development authorities
  5. For cooperatives, a copy of Certificate of Registration from Cooperative Development Authority
  6. For GOCCs, GAI and LGUs; copy of the Unit of Agency’s Charter

Requirements for One-time Taxpayers (With no previously issued TIN):

  1. Filled-up BIR FORM 1904
  2. NSO Birth Certificate or any valid ID bearing the applicant’s complete name, address, birth date, and signature
  3. Marriage Contract, if applicable

If your first place of employment is a company with a competent Human Resources department, they will often process your TIN for you, especially since they will be processing your income tax as well.

Usually, they’ll ask for the required documents as you start employment. However, if you’re self-employed, you’ll need to process your TIN yourself. Here’s how you can do that.

TIN Application Procedure for Self-Employed Individuals

  1. Accomplish BIR Form 1901 and 1906 and submit the same together with the documentary requirements with the New Business Registrant Counter of the RDO having jurisdiction over the place where the head office and branch, respectively.
  2. Pay the Annual Registration Fee (P500.00) at the New Business Registrant Counter in the BIR Office.
  3. Pay Documentary Stamp Tax (DST) (loose DST / BIR Form 2000* for DST on Contract of Lease, etc). Present proofs of payment.
  4. The RDO shall then issue the Certificate of Registration (Form 2303) together with the “Ask for Receipt” notice, Authority to Print.
  5. Attend the taxpayer’s initial briefing to be conducted by the RDO concerned for new registrants in order to apprise them of their rights and duties/responsibilities.

How to Get Your TIN Online

You can also apply for your TIN online through BIR’s eTIN website.

If you qualify as any of the following, you can use BIR’s online portal: Self-employed individuals such as Single Proprietors and Professionals, Mixed Income Earners (e.g. employee and single proprietor and/or professional at the same time), Employees, and Executive Order (E.O.) No. 98.

Here’s how you can get your TIN online:

  1. Go to the BIR’s eTIN website
  2. Before registering, make sure you have not previously registered for a TIN. Having more than one TIN is criminally punishable pursuant to the provisions of the National Internal Revenue Code of 1997, as amended.
  3. Register using a unique and valid email that you have access to. Instructions will be sent to this email address.
  4. Enter your personal information and ensure that all information is correct and accurate.
  5. Click the SUBMIT button, and follow the instructions sent to your email.

How to Get a Digitized TIN ID

Aside from getting your TIN, you can also apply for a digitized TIN ID that not only contains your TIN, but also acts as a valid government-issued ID.

Out of all government IDs that one can apply for, getting a TIN ID is one of the easiest to process. Hence, you might as well process it for your own use.

Here are the requirements needed to process your TIN ID:

  1. Valid government issued ID (such as SSS, PRC, voter’s ID, driver’s license, passport, etc.)
  2. Philippine Statistics Authority issued Birth Certificate

How to Apply for your Digitized TIN ID:

  1. Head to the BIR Office under whose jurisdiction your work falls under.
  2. Secure a BIR form 1904 if you are earning under the EO 98.
  3. After filling out the form, submit the form along with a valid government issued ID.
  4. You will be given your TIN ID. Request to have it digitized under EO 98. The digitized ID is usually takes a day to process. However, if there are many applicants at the time  you’re processing your ID, you’ll likely be asked to come back after a day or so to claim your digitized TIN ID.

How to Recover a lost TIN/TIN Card

Forgetting what your TIN is can be a hassle, especially since you’re only given one TIN for your whole life, and you’re not allowed to just re-register.

After making a plan to make sure you don’t misplace your TIN again, here are some ways you can recover your lost TIN.

  1. Contact the BIR Contact Center
  2. Go to the BIR Revenue District Office where your TIN is registered
    • Submit your BIR Form 1905
    • Affidavit of Loss (for a LOST TIN Card)
    • Original TIN Card (for a DAMAGED TIN Card)
    • Valid ID and Supplementary IDs

Whichever method you choose to recover your TIN, remember that it’s your responsibility to protect your TIN from being lost or from being stolen by people who might use your identity for their own purposes.

How can Freelancers or Self-employed Professionals avail of the 8% Tax?

Who is Qualified for 8% Tax?

Below are the Eligibility Requirements to avail of 8% Tax Rate

An individual must meet ALL 4 criteria to be eligible to register for the 8% tax rate availment option:

  1. Individuals (Single Proprietor or Professional or Mixed Income Earner) earning from self-employment and/or practice of profession;
  2. Taxpayers whose gross sales/receipts and other non-operating income did not exceed the P3,000,000 VAT threshold during the taxable year;
  3. Taxpayers registered and subject only to percentage tax under Section 116 of the NIRC, as amended; or taxpayers exempt from VAT or other percentage taxes; AND
  4. Must have signified their intention to elect the 8% income tax rate thru any of the enumerations under Section II(7) of this Order.

The following individuals are NOT eligible to avail of the 8% tax rate option:

  • Purely Compensation Income Earners;
  • VAT-registered taxpayers, regardless of the amount of gross sales or receipts and other non-operating income;
  • Taxpayers exempt from VAT or other percentage taxes whose gross sales/receipts and other non-operating income exceeded the P3,000,000 VAT threshold during the taxable year;
  • Taxpayers who are subject to Other Percentage Taxes under Title V of the Tax Code, as amended, except those subject under Section 116 of the same Title;
  • Partners of a General Professional Partnership (GPP);
  • Individuals enjoying income tax exemption.

The above taxpayers will be taxed based on the graduated income tax rates prescribed under Section 24 (A)(2)(a) of the NIRC.

Requirements and Procedure for Filing Income Tax for Self-Employed Individuals

Now that you’re registered as a self-employed individual and have a TIN, it’s time to finally file your income taxes.

While the process isn’t too difficult, it often takes a lot of time because many people wait until the deadline to process their taxes, which increases the number of people at a time and exponentially lengthens processing lines.

Keep this in mind as you read on how to file your income taxes.

Documents needed:

  1. For self-employed individuals; for individuals deriving mixed income, you’ll need to fill up three (3) copies of BIR Form 1701.

Procedure:

  1. Fill out 3 copies of BIR Form 1701. Make sure all information is correct and accurate.
  2. If there is payment to be made:
    • Proceed to the nearest Authorized Agent Bank (AAB) of the BIR Revenue District Office where you are registered and present the duly accomplished BIR Form 1701, together with the required attachments and your payment.
    • Receive your copy of the duly stamped and validated form from the teller of the AABs/Revenue Collection Officer
  3. If there is no payment to be made:
    • Proceed to the Revenue District Office where you are registered or to any established Tax Filing Centers established by the BIR and present the duly accomplished BIR Form 1701, together with the required attachments.
    • Receive your copy of the duly stamped and validated form from the RDO/Tax Filing Center representative.

How to Pay your Income Tax Online

Aside from filing your income tax in person, you also have the option of filing your income tax online through the BIR’s Electronic Filing and Payment System (eFPS) website.

If you’re looking to avoid long lines and save yourself a significant amount of time spent processing your income taxes, read on to find out how you can file online from the comfort of your home.

Procedure for Online Income Tax Filing:

  1. If you haven’t already, register your TIN here to be able to use BIR’s eFPS website.
  2. Check your email for a confirmation email from the BIR. This confirms your enrollment and should be sent in 3 to 10 working days.
  3. Once your eFPS registration has been confirmed, head to the BIR’s eFPS website and accomplish the tax forms and other relevant documents that need to be presented to online payment partners.
  4. Once finished, pay your taxes through online banking channels that are accredited by the BIR.

Currently, these are the only online banking channels that are approved by the BIR and can be used to pay for your income tax online:

  • Development Bank of the Philippines
  • Land Bank
  • Bank of the Philippine Islands
  • GCash

Or you can also use Taxumo – an end-to-end online tax filing platform in the Philippines that lets freelancers, self-employed professionals, and SMEs automate the whole tax filing process in minutes.

List of ITR Forms (2316, 1700, 1701, 1702)

BIR Form 2316: Certificate of Compensation Payment or Income Tax Withheld

This form is a certificate that must be accomplished and issued yearly by the Payor or Employer to each employee whose income is subjected to final tax declaration.

The employer must indicate the total amount that was paid to the employee and the corresponding taxes withheld during the calendar year.

The BIR defines compensation as either salaries, wages or other forms of remuneration given by an employer to an employee. Should you have no other income from other employers, there will be no need for you to file an income tax return.

The BIR Form 2316 is enough proof that your income has already been subjected to income tax. This is called substituted filing, wherein the employer files the income tax returns for the employee.

This form is normally requested as part of pre-employment requirements in order for your new employer to make sure that the correct deductions have been made by your previous employer.

The BIR Form 2316 must be attached to the Annual Income Tax Return, which is the BIR Form 1700 for individuals receiving purely compensation income or BIR Form 1701 for individuals with mixed income.

BIR Form No. 1700: Annual Income Tax Return for Individuals Earning Purely Compensation Income

This return is filed annually by every resident citizen deriving compensation income from all sources, or resident alien and non-resident citizen with respect to compensation income from within the Philippines.

The following are not required to file this return:

  1. An individual whose gross compensation income does not exceed his total personal and additional exemptions.
  2. An individual whose compensation income derived from one employer does not exceed P60,000 and the income tax on which has been correctly withheld.
  3. An individual whose income has been subjected to final withholding tax (alien employee as well as Filipino employee occupying the same position as that of an alien employee of regional or area headquarters and regional operating headquarters of multinational companies, petroleum service contractors and sub-contractors, and offshore banking units; non-resident alien not engaged in trade or business); and
  4. Other individuals not required to file an income tax return as provided for by the National Internal Revenue Code and other laws, e.g. senior citizen receiving purely compensation income of not more than P60,000.00 in a year.

This return is filed on or before April 15 of each year covering income for the preceding taxable year.

BIR Form No. 1701: Annual Income Tax Return for Self-Employed, Professionals, Estates, and Trusts

This return is filed annually by the following for business income derived during the calendar year regardless of amount of gross income:

  1. A resident citizen engaged in trade, business or practice of profession within and without the Philippines.
  2. A resident alien, non-resident citizen or non-resident alien individual engaged in trade, business or practice of profession within the Philippines.
  3. A trustee of a trust, guardian of a minor, executor/administrator of an estate or any person acting in any fiduciary capacity for any person, where such trust, estate, minor or person is engaged in trade or business.

This is also filed by individuals who receive mixed income (compensation with self-employment/professional income).

However, an individual whose sole income has been subjected to final withholding tax pursuant to Sec. 57(A) of the Tax Code, or who is exempt from income tax pursuant to the Tax Code and other laws, is not required to file an income tax return.

This return is filed on or before April 15 of each year covering income for the preceding taxable year.

BIR Form No. 1702: Annual Income Tax Return for Corporations and Partnerships

This return is filed annually by every corporation, partnership, joint stock companies, joint accounts, associations (except foreign corporation not engaged in trade or business in the Philippines and joint venture or consortium formed for the purpose of undertaking construction projects or engaging in petroleum, coal, geothermal and other energy operators), government-owned or controlled corporations, agencies and instrumentalities.

This return is filed, with or without payment, on or before the 15th day of the fourth month following the close of the taxpayer’s taxable year whether fiscal or calendar year.

How Freelancers (and Self-Employed) Can Get their Income Tax Return

As a freelancer, it’s your responsibility to file your own taxes. The first thing you need to do is register as a self-employed individual at the BIR. These are the required documents needed:

  1. BIR Registration Form (Form 1901)
  2. BIR Payment Form (Form 0605)
  3. BIR Authority to Print Form (1906)
  4. NSO Birth Certificate
  5. Barangay Certification
  6. Cedula
  7. TIN Number/Card
  8. Books of account (ledger/journal/expenses book)

When you have all the necessary documents together, you’ll need to submit these to the BIR District office that jurisdiction over your business.

Pay an annual registration fee of P500, a P15 certification fee, and another P15 fee for the documentary stamp tax.

Next, you’ll be required to attend a seminar held by the BIR that briefs taxpayers, and then you’ll receive your Certificate of Registration (COR). Once you have your COR, you’ll then have to apply invoices or receipts using BIR Form 1906.

Then, register your books of accounts and have them stamped in the same district office.

When you’ve successfully registered as self-employed, you’ll eventually have to file your Income Tax Return. Here’s how you can file your Income Tax Return:

  1. On BIR’s website, download BIR Form No. 1701, titled “Annual Income Tax Return for Self-Employed Individuals, Estates and Trusts.”
  2. Follow BIR’s guidelines and fill it out completely and accurately. Double check to make sure all information is correct.
  3. When you’ve finished filling up the form, head to any authorized agent bank of the district office where you are registered and present to them your form and documents.
  4. If you’ve done everything correctly, they will stamp and validate the form as proof of filing your ITR.

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About Michie Victoriano

Michie is Grit PH's resident Marketing Research and Analyst, with more than 7 years experience in Marketing, Research, Analytics and Online Marketing; and 2 years of experience in Search Engine Optimization.

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Comments

  1. Francis David says

    Hi. Other than 1701 and 2551Q, what other forms must a self-employed submit on a regular basis (monthly/quarterly)?

  2. Jean says

    Hi, I have an existing business (resto) in manila and wanted to open another business in another city with a different type of business (computer shop). I was wondering if there will be another 1701 for my computer shop or will it be included in the resto. If in case my 1701 is just one (resto+computer shop) will manila city tax my business located in a different city during business permit registration and vice versa.

  3. Benedict Eduard de Pio says

    I got problem with BIR as freelancer.
    1. If you don’t print the receipts with in 30 days after you register your business (they said freelancer are considered as business) you get penalty of 10,000. I got penalty because didn’t know where to print the receipts. My clients won’t ask for receipts even i insist. Since 2018 my receipts are useless and I pay it for 2k+ because it’s required by the BiR. Not even once I used it.
    2. I got penalty again last January 2019 for late filling of Books of 2018. I pay for 1,000 for that late filling of books. They said the deadline of filing of books is October to December 31. So you need to go to the BIR office to File the Books.
    3. I avail the Train Law which I payed %8 Quarterly in deadline May 15 (1st Quarter) , August 15 (2nd Quarter), November 15 (3rd Quarter). So I ask my self when should i file the 4th Quarter? When i tried to fill up the eBir Form there’s no 4th quarter, so went to the BIR office to ask (i really hate the BIR office, it’s nightmare there). They said there’s no 4th Quarter, you need to file the Income Tax Return (ITR). So I did and so ask “Which form?” they said that the form is not yet available for %8.
    4. March 1 2019, Friday , I went to office in BIR to ask for assistance on how to fill up the ITR for %8 form. The officer ask me to fill up the ITR form 1700A. I filled the necessary fields and then when I tried to put my Annual income, I assumed i have to pay my 4th quarter tax, but the result went to negative. I ask the officer why.. he said your income is below 250,000. I said oh so what should i do? He said you don’t have to pay tax. I said what now? He said after I submit it online , I need to go to the Admin office. I said what?? for what? He said just go there. I was like blank the whole time.

    Note: I attend the seminar of BIR which is required before registration of business, I take note everything the officer said in the seminar, most of the topic is train law and estate tax.

    Now, I am thinking to file closure of my business (freelancer) it’s really a pain for me. I need to the BIR office whole day to get the information I need. I end up like nothing to get there, it just waste of time and money.

    • iceprincess says

      It’s better to consult with CPAs/Tax Experts rather than going to the BIR Office because most of BIR officers won’t give you the very detail of using those forms. By consulting with Accountants/Tax experts, you won’t get the hassle of waiting in the line in the BIR office for your queries. Otherwise, you may prefer on the BIR Website if you had time to read all those requirements to file and pay as a taxpayer.

    • Davao Freelancer says

      I think this article is to promote Taxumo

      It is indeed a pain in the ass to pay your taxes as a freelancer. The government doesn’t precisely know where to put us. We are not businesses, and we are not like Doctors/Dentists who are set as Professional Servers.

      I hope someone can put up a business of acting as an employer for the freelancers, then just have a deal where it is really the freelancer who is paying their own salaries. Then the pseudo employer manages all Govt payments, then the freelancer ’employee’ will just pay the premium of availing of the ’employer”s management

      makes sense? then all bonuses etc, will just be part of the deal.

  4. MB says

    I have a concern though, it is not related to tax but I would like to ask how do you normally fill out forms when you apply for cards?
    It will always ask for an employer/business name and business address. Do you just enter your name and then your house address?

  5. Robert James says

    Hi. I’m a freelance writer with foreign clients. I have a TIN already, but the last time I had a real corporate work was way back in February 2015. My income fluctuates, so I’m not sure how to properly determine how much I would owe if I start to file taxes today. Can you give me a ballpark figure?

    I’m single and I let’s say I earn 50 thousand a month. Also, how much do you think do I owe if I were to be charged for late or delayed filing?

  6. R says

    May I ask if you know how to verify my information for TIN? (if that’s possible) I mean, I like to know if I haven’t registered myself for TIN before. I just wanna make sure because what if I’m already registered but then I just forgot that (possible case). Can we verify that thru online or do they have that service in their office (BIR)?

    • Leaan says

      Fill a BIR Form 1905 and leave the TIN as blank then submit it to them, then you’ll validate if you have existing TIN number.

  7. aap says

    Hi, I just resigned from being an Insurance Agent. May I know what are the proper steps and requirements needed to end my tax payments. Thanks in advance.

  8. Kat says

    Hi! Do you know how it will go for full time remote workers whose salary is taxed in the employer’s country? Thanks.

  9. sieng says

    Hello, I have a few questions. I am a family tutor online with foreigner clients. I worked in a company in 2019. My income is not stable just around 25K to 28 a month. What process should I do first? Can you give me an idea how to process this.

  10. Alynn Bern says

    hi, may I know what is the requirements for freelancers this 2021? has anything changed? I was asked to give a receipt of sworn declaration of annual income prior my start date for my new job. How does this work? Because I really have no idea, will it be coming from the BIR? What were the requirements? Also, how do I file my tax? Some says it’s quarterly but how will I able to accomplish this? Can you help me please.

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