The Bureau of Internal Revenue just announced recently that anyone who is earning income, especially those who are earning via electronic means, should be registered with the BIR. They discussed in detail business registration with the BIR in this circular RMC 60-2020.
Part of the list of types of business mentioned by the BIR are the following:
businesses earning via electronic means
Partner sellers and merchants
Internet service Providers
and other facilitators
All business owners shall update their business registration document with the BIR and their status no later then July 31, 2020.
Business owners, aside from business registration, are all encouraged to voluntarily declare all past transactions when declared and paid before the said date.
For all newly registered businesses, too, you are also required to have and do the following:
Issue Official Receipt or Invoice for every sale
Keep registered Books of Accounts and accounting records of business transactions
Withhold taxes (if applicable)
File required tax returns
Pay correct taxes on time
BASIC REGISTRATION GUIDELINES FROM THE BIR
Which RDO should you register with?
In general, register with the RDO in the city where your head office is located or in the city of your residence if you are an individual or self-employed tax payer.
If I don’t have TIN?
You have to get a Tax Identification Number first before registering your business.
What if I have a TIN but I haven’t registered any business yet?
Please register your business using Form 1901 of the BIR in the RDO within the correct city of the place of business.
If you need the list of requirements, feel free to head on over to https://www.taxumo.com/business-registration/ The complete list is there for Individual tax payer (whether you are a Non-Licensed professional like a consultant, freelancer, etc. or a Licensed Professional like a doctor, etc. or a Sole Proprietor like an online seller, etc.)
What are the requirements to get a Certificate of Registration?
How do I know if I am completed business registration with the BIR?
You will know if you are completely registered with the BIR if you have a Certificate of Registration or Form 2303, An Authority to Print form (this is so that you can have ORs and Invoices printed by accredited printers) and stamped books of accounts.
If you are based in these locations, Taxumo offers a service where they can process the registration for you:
All parts of Metro Manila
If you have questions, please feel free to reach out to email@example.com.
Are you one of those freelancers who still ask why you need to pay your taxes?
I have heard many freelancers express their fear and disappointment about paying their taxes. “Why should we pay when we don’t have a stable income?” “Why should we pay when we can hide what we earn since we earn online?… the government doesn’t have to know!” Well, for the record, it’s not only freelancers who feel this way. For the longest time, this has been the sentiment of Filipinos in general.
It’s tough to live in a country where tax laws are so complicated. These laws are so complicated that you end up not paying at all. It’s difficult balancing understanding taxation with looking and working for clients as a freelancer. There’s just not enough time.
If you are facing these same dilemma as a freelancer, then I am here to tell you that there is nothing to fear. Instead of thinking of all of the disadvantages, let me share with you why I pay taxes as a freelancer. Let me give you the lo down why it’s actually beneficial to pay taxes and become “legit” self-employed individuals.
Enjoy your income! Enjoy being a Freelancer.
What good is hard-earned money when you can’t enjoy it. We all want to travel, have cars, own a house, etc. But in order to get our VISA approved or our car or home loans approved, we need to show proof of income. Since we are not “employed”, we don’t have a payslip to show or a Certificate of Employment to present. The chances that our VISA will be denied is high.
When you regularly pay your taxes as a freelancer, you have your tax forms that you can show as supporting document when you apply for a VISA or for loans. Your chances to get approved are higher, and you don’t have to worry about not ever having any proof of income. Remember though that you need to be a regular and consistent tax payer, meaning you have tax forms for every kind of tax that you need to pay and you never skipped filing / paying your taxes. To make it easier for you, you can check out https://www.taxumo.com to help you with your taxes.
Easily verify your PayPal account and will never encounter problems if your Business Documents are in place
PayPal is now strict when it comes to presenting proof of your existence. PayPal will require you now to present these “proofs”. This I think is a good move. This keeps all scammers away and protects all of us non-scammers! Here are the requirements from PayPal.
Proof of Identity: Present a valid proof of identity
PayPal accepts a copy of:
– Your national ID card (front and back),
– Your driving license (front and back),
– Your Passport, or
– Other photo ID that was issued by a government body
All of the information below must be visible on the document:
– First and last name
– Date of birth
– Date of issue and expiry
– Document ID number
Note: The document needs to be fully visible. Partial documents cannot be accepted as a valid proof of identity.
Proof of Business Address: Verify your business address by providing a valid proof of address
PayPal accepts a copy of:
– Utility bills (phone and broadband services, health insurance, gas, water, electricity, etc.)
– Bank or credit card statements
– Any other government-issued letters or statements in your name
You can take a photo of your document and upload it to your PayPal account. You can also send us a copy or a screenshot of your online bills/statements.
They do not accept:
– Purchase receipts/invoices
– Partial documents
– Screenshots of your online banking or service pages
The name and address on the documents must match those on your PayPal account.
The proof of address document must be dated within the last 6 months.
We cannot accept P.O. Box addresses as physical address verification.
Business Info: Verify your business entity by providing a proof of business documentation What is a valid proof of business?
Please submit a copy of your Business Registrations (Business registrations, Memorandum/Article of Association, Certificate of Incorporation or equivalent).
This document(s) must collectively contain the following information:
Who owns or controls your business,
The business name, registration number, and
The latest validity period of the business.
These are the things that you need to present. When you register with the Bureau of Internal Revenue in the Philippines as a Freelancer, you will have a Certificate of Registration or a COR. You will be able to submit this as proof of business. Once you have a COR though, you will need to regularly pay your taxes for your freelancing business.
Here is a quick video on how to sign up for a PayPal account:
Get bigger and higher paying Local Clients!
The thing about getting international or foreign clients is that there is a lot of competition. I’ve seen though that the local landscape is in dire need for more suppliers.
Local companies are now open to hiring independent contractors. In order to land a job with huge corporations or even just so you can haggle your pay, you need to be able to issue an official receipt.
Official receipts are documents that support sales of service, and it is issued upon collection of payment from customers. The large companies use official receipts as supporting documents for accounting entries that they create, and they also use it as “expense” when they compute for their own taxes.
So as a freelancer, this is what I do. I go through a supplier accreditation process. This process requires me to submit all of my business documents.
Then when I win a project, I send an invoice so that I can bill for services. Most local clients accept paperless invoices, such as a PayPal invoice. You can prepare your invoice conveniently using PayPal then you can send it through email. You can also use it as a reminder to collect payment and even send recurring payments to continuous projects.
After payment has been given, this is the time when you send the BIR Official Receipt.
Be a Responsible Filipino Citizen
Paying taxes is our duty as Filipino Citizens. If we truly want to help our country grow and prosper, we need to pay your taxes as a freelancer. Every day, we are experiencing things that we paid for with our taxes (drive through highways, take public transportation, etc.). If we want to see more improvement, we need to do our part and contribute by paying your taxes.
Also, if we want a voice, we need to earn that voice. I don’t think we have the right to complain if we’re not at least paying our taxes 🙂
Avoid being Penalized
In my opinion, this is the last and the least of your worries. If you are regularly paying then you need not worry about this. But for your information, yes, you can be imprisoned for tax evasion and non-filing of appropriate forms.
Failing to file and pay your taxes come with hefty penalties and can range from imprisonment for 2 to four years. Summed up, it can reach as high as up to five times than your original tax due. So, it would be better to pay your dues and avoid being penalized.
Personally, my freelancing business grew, because I’m legit and I pay taxes. Business partners, brands, and other people that I work with and plan to work with respect and trust me more, because I have a legit business. Having business documents will open you up to more opportunities and tools that you can use.
It’s always good to start your freelancing career the “legit” way, so you need not backtrack and fix stuff.
Work well and do it right! Pay your taxes as a freelancer!
I have seen a shift in the mindset of a lot of freelancers (for this working online and for those rendering offline services). Back in 2013, when we at Manila Workshops started to create learning events for Freelancers and aspiring freelancers, we saw that most of them were in that realm of trying things out. Some of the freelancers that we encountered were starting a freelancing career and most of them were still thinking of starting. Four years after, we see that now, a lot of them want to make this their full time profession. They want to make this a career and their main source of income.
Since they will make this their primary source of income, a lot of questions on legitimising and registration with the government come up. As you know, as a freelancer, you need to fix and do everything (as an employee, people in HR do it for you). Registering as a freelancer in the Philippines is actually quite easy. I kid you not! You just need resources (like this article) to guide you.
Do I need to pay taxes even if I earn only a little from Freelancing?
Yes, you need to pay taxes, and it’s clearly stated in Section 74 in the Philippine Tax Code. It says that for as long as you receive income, regardless of the source (even from international entities), you are required to pay taxes. Again, we are seeing more freelancers pay taxes because of their need for a proof of their income which they will use to get VISAs, loans, health cards or HMO plans, etc.
Please do not wait for the time that you will need this for your VISA. Taxumo cannot magically create an ITR for you 🙂 Plus for Visa applications, what embassy’s want to see is your credibility and stability, meaning you frequently and REGULARLY FILE.
So, I’m now earning a small amount of money from my freelancing career, but I am also employed. How do I declare my income to the Bureau of Internal Revenue?
First, you have to register as a non-PRC Licensed professional. You may opt not to have a DTI Certificate of Registration. In DTI you reserve the name of your business, which is something that is not really that important if you’re registering as an individual. As a freelancer, you will just need to get an Occupational Tax Receipt or Occupational Permit and Barangay Clearance from your Municipal Hall. You won’t need to get a business permit that Sole Proprietorships, Partnerships and Corporations will need.
After you have these, just collate the other documents needed before going to the BIR. Check your requirements here by clicking on the button “Apply as a non-licensed professional”: https://www.taxumo.com/business-registration
What are the instances when I need to get a barangay business permit and clearance?
For example, you are a yoga teacher that is commissioned by different yoga studios, you need not get a barangay permit. Once you open your own studio though, this becomes a sole proprietor/business that you will need to register. You will need to go to DTI and the Municipal Hall, and of course, BIR. If you don’t have employees, you need not go to SSS, Philhealth and Pagibig, since you will just have to pay for your own SSS/PHIC/Pag-ibig contributions under your own identification number as a voluntary contributor.
For employees, they have to option to opt for “substituted filing”, which means they are exempted from filing an income tax returns on their own. To qualify, one should have only worked for one employer during a calendar year and has no other sources of income. This can be availed by signing off on the Form 2316 (proof of remittance of payroll tax) provided by employers after the end of the year, or after an employee has moved on. The Form 2316 will then be submitted by the employer (or ex-employer) to the BIR.
If one has worked for more than one employer during a calendar year, he or she would have to file for either of the following:
Form 1700 – use this form if one has no other sources of incomeother than employment income, and add all employment income and deduct all payroll taxes withheld by employer(s), and pay remaining tax due (if any). This is used if you are transferring from one employer to another.
**Please chat with with us at Taxumo.com if you want to avail of this service (Chat button is at the lower right hand side of the https://www.taxumo.com)
Form 1701* – use this form if one has other sources of income in addition to employment income, or earning purely business income; use this form to report all sources of income (employment, business, others). This is the form that will be used for people who opted for Itemized Deduction or are mixed income employees (have a day job and earning from a side business)
*Self-employed freelancers, professionals and sole-proprietors are required to also file quarterly income tax forms (Form 1701Q) in addition to the annual Form 1701. However, employment income are not required to be included in the quarterly tax returns as these are to be reported only at year-end.
Form 1701A – Please use this form if one has no other sources of income but their business income or income from profession. This is a new form released by the BIR for those who chose the Optional Standard Deduction Method (OSD) or opted in for 8% GRT in the previous year
Self-employed freelancers, professionals and sole-proprietors are also required to pay quarterly taxes. Depending on their classification (see section below), they will need to file either (updated for TRAIN):
Under Professional – Graduated Income Tax Table:
Non Vat / Percentage taxes (Form 2551Q) – gross revenues x 3% or VAT (Forms 2550M and 2550Q) – gross revenues x 12%, less the VAT charged by VAT-registered vendors/suppliers
Quarterly Income taxes (Form 1701Q) – Graduated Tax Table
Under Professional – 8% GRT Income Tax Rate
Quarterly Income taxes (Form 1701Q) – 8% of Gross Receipts or Gross Sales
But before going to taxation, what are the requirements to register as a freelancer in BIR?
First of all, you have to decide on a business address. The city where your business address will be should match the Revenue District Office of the BIR that your TIN will be attached to. If you previously worked in Makati, and have decided to use your home address in Pasig as your business address, be sure to transfer your TIN from the Revenue District in Makati to the Revenue District in Pasig. Just fill up the form 1905 (Download Form 1905) then submit it at the current Revenue District Office. Wait for at least a week before going to the new RDO to register as a freelancer.;
You should fill out the form 1901 (download Form 1901). You can get it from the Officer of the day or from the guard from the entrance of the RDO.
For the Taxpayer Type, as a freelancer, choose professional – In General. (It’s best though to ask the Officer of the Day on how they classify Freelancers).
Be sure also that you start as a Non-Vat entity. Vat Entities are those that earn Php 3.00 Million a year. Be sure also that you say that you still don’t have employees, if you’re working alone. Check the form, and ASK QUESTIONS before signing and submitting the form.
Each form is only at Php 500 which you can pay at the Authorized Agent Banks (AABs) near the RDO using form 0605. There will also be a certification fee and you also have to pay for Documentary Stamps. These will be around Php 30 to Php 50. You will get the Certificate of Registration a week or two weeks after.
Before leaving the Revenue District Office though, you can order for you Official Receipt booklet. Some of the accredited suppliers are in the BIR premises. If you don’t see them, just ask the BIR Officer the details of the supplier that you may contact. One order is normally 10 booklets at the minimum. This may cost 1000 to 2000 pesos for 10 booklets (depends on the design and if duplicate or in triplicate).
When you go back for the Certificate of Registration, you will also receive the following: ATP or Authority to Print and your books of accounts. The BIR will stamp your books of accounts (journal/ledger/subsidiary professional income book and subsidiary purchases/expenses book) and also your official receipts.
You will know if you are registered when you have your Certificate of Registration. Once you have your COR or form 2303, you SHOULD already start filing and paying for your taxes. Be sure to file even if you haven’t earned anything for the month.
Here is the schedule for the tax deadlines for a Non-Vat Entity
Quarterly Percentage Tax (Form 2551Q) – BIR Deadline is on April, July, October and January of the next year (usually on the 25th of these months). Quarterly Income Tax (Form 1701Q) – Q1 is on May 15 / Q2 is on August 15 / Q3 is on November 15 / Annual Income Tax Return is on April 15 of the following year.
Once you have your Certificate of Registration, this is where Taxumo, an online web application service can help you file and pay for your taxes. All you need to do is:
Copy the details in your Certificate of Registration to your Taxumo Profile
Fill in your income and expenses tabs
Click on the tax cost to submit your tax filing
Payment can be done online, too! (You can even pay via PayPal! Just go to Taxumo.com
Taxumo will save your BIR confirmation and the payment confirmation in your dashboard as proof of payment.
Their deadline is 5 days earlier than the BIR deadline
YOU’RE DONE! It’s so simple. Please view this video if you need more information.
I’m in the middle of rebranding, restructuring my organization and a lot of “re’s” coming my way. Part of all of these things that I plan to do is to go through business registration again for the new companies that I am setting up. If you are thinking also about getting your business permits or business renewal registration, read on! vOffice Philippines can actually assist you in renewing your business registrations for a promo rate of just Php 4,000.
With this fee, vOffice will:
– Renew your business permit for the third quarter of 2015
– If eligible to renew for the entire year, vOffice can assist with this as well.
This service is open for both vOffice clients and non-clients. All you need to do is just call 2244-330. I am happy to be a Client of vOffice. If you haven’t signed up yet and if you are looking for an office for your freelancing work or start-up business, avail of the free two months from my blog, by signing up using this link: http://voffice.com.ph/jumpstart-gingerarboleda/
I have finally have a legal business. I actually had it since May of this year. This is one of my goals for 2013. I have had businesses before, but this is my first sole prop business (I am part of corporations and had a partnership business before).
A lot of mompreneurs get stuck in this stage. We all want to put up our own businesses but we all think that it is such a hassle to go through the registration process with the government’s different departments. Well, the basic steps are…
1) Go to DTI or SEC. In my case, since it’s a single proprietorship, I went to DTI. You can read all about the steps that I underwent when I applied for certification. Opening a Sole Proprietorship Business: DTI Process
3) And the last step was to go to your BIR RDO. Remember that your personal TIN should be transferred to the RDO of your place of business. There are forms that you have to fill out (ex. 1901 Application for Registration, etc.) and fees that you have to pay. After submitting all of the requirements, you have to remember all of your deadlines for reports. I have attached this guide from our RDO. Deadlines of the BIR are all the same anyway. I hope this helps you.
I’m excited for The WAHMeo Series: Brand and Build Your Online Biz! In this workshop, Business Registration and Taxes will be discussed by Fitz Villafuerte. Fitz Gerard Villafuerte is a civil engineer who decided to quit the corporate world back in 2003 to pursue entrepreneurship. Aside from running several traditional businesses, he also owns and manages an online store called Blogger Shirts (www.bloggershirts.com) and a microjob marketplace called 199Jobs (www.199jobs.com). His blog, entitled Ready To Be Rich (www.fitzvillafuerte.com), is currently the Best Business and Finance Blog in the country as recognized by the Philippine Blog Awards.
If you have questions on the process, this is a good workshop to attend and clear your mind of all these concerns. Aside from the business registration aspect, you will learn a lot from the different speakers about putting up your own business. Your truly will talk about creating business plans. If you are interested, here are the details.
To sign up, just click on the poster and it will take you to the registration page.
The WAHMeo Series: Brand and Build your Online Biz!
I hope this post helps you become more confident in starting your own business!