Freelance and Tax in the Philippines
In the Philippines, there is a widespread misconception that all self-employed people are exempt from having to pay taxes. If you match any of the following requirements, you are excused from paying taxes:
1. You receive a minimum wage.
2. Your gross income is much lower than your basic personal exemption (Php 50,000, irrespective of marital status) and your extra personal exemption (Php 25,000/child dependant, maximum of 4)
3. Your yearly compensation from your job is less than Php 60,000.
Freelancers who are registered with their respective areas are obligated to pay tax costs regardless of whether or not they are proactively earning revenues. If you are a freelancer in the Philippines and need to file taxes, the following guide will provide basic information to get you started on this topic.
The BIR defines self-employment as follows:
1. Individuals who are involved in commercial activities and who obtain a portion of their personal income from those trade transactions
2. Practitioners like (1) “individuals who draw their income from their profession,” such as attorneys, and those licensed with the Professional Regulation Commission (PRC), such as physicians, dentists, certified public accountants among others; and (2) “those who practice an art and earn a livelihood from it,” such as authors, athletes, and many others. Professionals also include those who work from home, whether as freelancers or full-time employees.
Freelancers, on the other hand, must file everything themselves, which may be time consuming. The lack of knowledge we have on the issue is terrible on its own, but when combined with the very demanding procedure of tax filing, people become exhausted. Self-employed people need to sign up with the BIR just as everyone else does so they can file their taxes. As there are a few additional papers required, the procedure might be more time-consuming than tax registration for employment which one should be prepared for before embarking in the freelance industry.
