Every January 2, I usually prepare all of my current Business Documents. I’m registered as a Sole Proprietorship. This means that I have to renew my documents with both the Local Government Unit / Municipal Hall and with the Bureau of Internal Revenue or BIR. Usually, I need to go to both places, which is such a hassle!
But guess what? This year, because of Taxumo, life became easier! You can now renew your 2018 Certificate of Registration or COR (file and pay form 0605) via Taxumo!
What Happens If I Don’t Renew My Certificate of Registration?
To avoid penalties, the deadline for renewing your Certificate of Registration would be January 31. Failure to renew this would incur fines ranging from PHP 5,000 to PHP 20,000.
What Is the Standard Process of Business Renewal vs. the Taxumo Way?
The standard process for renewing your Certificate of Registration would be:
Go to your RDO (Revenue District Office) and submit a fill-out BIR Form 0605
The officer of the day will then compute the fees that you need to pay
You need to settle the payment at an Authorized Agent Bank (AAB), duly accredited by the BIR in your RDO.
The standard process could take hours, because of the number of people who will have to renew. If you value your time, just do it online!
With Taxumo, you just pay your Certificate of Registration online, without the stress.
Here are the Steps to Renew Your COR via Taxumo:
If you already have an existing Taxumo account, all you need to do is activate the 0605 Form on your company profile.
To do this, simply follow the steps listed below.
Go to your company profile
Scroll down until you see the forms that you need to file.
Check on the 0605 form and click the save changes button.
Go to your account dashboard and click on the file button.
Fill-up the form details (applicable date if you’re paying for 2019 is Dec. 31, 2019)
Choose your preferred payment method and click pay.
That’s it! You’re done.
It’s super easy!
Note that this process is only for renewing your BIR Certificate of Registration. Again, if you are a sole proprietorship, have a partnership or corporations, you still have to renew you other business documents (baranggay clearance and business permits) in the LGU / Municipal hall.
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 completely understand. We’ve been receiving thousands of inquiries via our chat button in Taxumo’s site this April asking a lot of things about the 8% Income Tax Rate option. So, I thought writing about it would be a good idea (and note that this is based on my understanding). Full disclosure! I am not a tax expert. I am just relaying what I have heard from our BIR contacts. And if you read opinions on this post, this is MY own personal opinions and not the opinion of Taxumo. Got it? 🙂
What is this 8% Income Tax Option and who can avail of this?
Because of the TRAIN Law (aka R.A. 10963), a lot of changes have been happening and a lot of people don’t know what to do. For sole proprietors, like yours truly, I just take in and digest parts of the TRAIN LAW that is applicable to me. One of the things that is an option now is the opportunity to avail of a simpler 8% Income Tax Rate Option.
The BIR released Revenue Regulation or RR 8-2018 which details how the income tax changes as per TRAIN will be applied. Although it explains a lot of things, there are still things that are not explained thoroughly. According to the regulation, the 8% Income Tax Rate on Gross Sales/Receipts can only be availed by any self-employed individual whose gross sales/receipts for the year does not exceed P3,000,000 (aka the VAT Threshold).
Check out this video from Taxumo:
So should I choose the 8% Income Tax Rate Option?
Choosing the 8% tax rate option is simple because it’s a flat rate! No hassle, no computations 🙂
But for me, I actually did not choose this. But I have my own reasons, and these are:
The Regulations said one thing but when I called my RDO, it seems they were not following what was on the RR. Case in point: RR No 08-2018 says: “If the taxpayer is unable to timely update the required registration, s/he shall continue to file the percentage tax return reflecting a zero amount of tax with a notation that s/he is availing of the 8% income tax rate option for the taxable year.” BUT, when I called my RDO, they said that for them (whatever that means), they don’t accept these forms filled out according to what the RR said.
So two (2), I personally called BIR and asked what the process is to opt for 8% and the gave me the process (as seen below) BUT I personally don’t have time to do that (hahaha! again, it’s just me and my laziness!)
And three (3), as an events coordinator, we have a lot of expenses. So, based on this calculator, I think the 3% plus income tax is still a better option for me.
So how do you tell the BIR that you’re opting for the 8% Income Tax Rate Option?
Step one: Go to your BIR RDO and bring your Certificate of Registration (COR) and a Letter of Intent. They will ask you if you haven’t gone beyond the threshold of Php 3 Million (They will also check your records and see if there are open cases, etc.)
Step two: Wait for them to release the new COR. It will not include “percentage tax” anymore. It will only show you that you need to pay for Income Tax and your yearly renewal. When do you get the new COR? Well, it really depends on how fast your Revenue District Office can release it.
It’s not that bad really and it’s very simple. I’m just lazy (haha!). After you receive your new COR, you can use Taxumo for filing taxes all throughout the year at just Php 250 per form. We just don’t have the rate yet for the 8% filing and the annual income tax filing, but we’re really affordable so you don’t have to worry about that part.
Please don’t forget to still file the first quarter Percentage Tax form for this year and just indicate zero filing. This is what the BIR Officers in different RDOs told me.
For opting in for the 8%, you need to update your COR before April 30, 2018.
What else did I miss?
Oh, for the Quarter 1 Income Tax Return filing due in May, don’t forget to indicate that you’re “opting in” to avail of the 8%. If you miss indicating this in the form, you will have to file your Income Tax Returns using the Graduated Income Tax Table AND also file quarterly percentage tax returns. I’m not sure if you need to change your COR back again to indicate that you’ll pay percentage tax though, but it’s most likely that you will.
So that’s it! These are the things that I know about the 8% Income Tax Rate Option.
Now you’ve probably already made your new year’s resolution list, and I hope you’ve started to make some progress when it comes to realizing each of your goals. But if you’re still looking for a little direction, I thought I’d come up with a few things to start or update yourself on this year to make sure that by the end of it, you’re happier, healthier, and wealthier!
Amp up your graphics game.
Learn to use graphics apps and services like those offered by Canva.com. I’m not a very artsy person, but Canva has made my life wonderful! Whether you’re an entrepreneur or a professional, you’ll find this skill useful for social media promotions and ads, poster-making, sprucing up presentations, and so on. Even if you’re not using this for business, you can prettify your personal messages and posts, add personalized graphics to your blog, and more.
CANVA BASIC TUTORIAL
Open an online payment account.
If you’re not already using PayPal or a similar online payment gateway, this year’s the year to do it. It’s getting more and more convenient to buy and sell online, and this is one way to keep your credit card information secure. Plus, you can use this to send money to loved ones anywhere, anytime.
Transition to online shopping.
Like I’ve mentioned, online shopping is becoming more and more popular and convenient. Whether you get home, fashion, tech and more from Lazada, makeup and skincare from BeautyMNL, restaurant food and groceries from HonestBee, or whatever else you shop for online (and these are just a few of the local options), you have to admit that online ordering and delivery is one way to beat the traffic and save hours on your shopping trips.
Use transport networks.
Ride services like Uber and Grab have been around for years, but if you haven’t been using these too much, now’s the time to embrace them. And before you start thinking using them regularly is too expensive, perhaps you should also count the cost of parking, gasoline, car maintenance, and either wages for a driver or your own driving stress. Plus, there are ways to save, by sharing a ride with officemates who live close to you or with neighbors who work in the same area as you, by creating a “carpool” system so your kids can share a car with schoolmates from the same area, and so on.
Start or grow your rainy day fund.
This is one of those things that makes just about everyone’s new year’s resolutions list, but rarely gets resolved to your satisfaction. It’s understandable—expenses pile up, and temptations to spend are everywhere. But this year, start thinking about a sustainable way to save money. Better yet, look into investments that will grow your money instead of simply saving it.
Schedule regular date nights with your partner—and your gal pals.
It’s so easy for life to get in the way of romance, so make sure you and your partner take time out to rekindle that flame. Add it to your weekly schedule so you never forget to spend some quality time together.
On a related note, your monthly schedule should also include time with your BFFs. One study I read about has shown that, for women, spending time with your best friends can help your body fight stress and create more serotonin, which is a mood-balancing hormone essential to staving off depression. And another study mentioned we are more likely to live longer if we maintain a large network of friends as we get older.
Maintain a skin care regimen.
Time and aging only move forward, never backward, so it’s never too early or too late to start taking care of your skin. This doesn’t just mean slapping on some facial wash and moisturizer each morning and night. Pamper your skin and it’ll keep you looking and feeling fresher and younger. Plus, you’ll need less makeup if the canvas you have to work on—your face—already has a healthy glow to it. Check out this 10 Step Korean routine video that I created using Nivea products!
Explore freelancing and entrepreneurship possibilities.
Whether you’re already a freelancer or entrepreneur or you are working a corporate job, it’s always a good idea to diversify your income stream. And who would say no to making a little (or even a lot of) extra money? Explore ways to supplement your current income, and if you need a little help doing that, check out the events we have planned for this year at ManilaWorkshops.com.
Bullet journaling and similar practices can help with your efficiency and productivity, so I’d definitely recommend this. But what I really would suggest doing this year is journaling for your state of mind. Here are some ideas for your journal. go over the events of your day to put things into perspective and clear things for the next day, make a list of things to be happy about and grateful for, have a daily goal and write about what you did to achieve it. You’ll find yourself happier and healthier just for having picked up the pen more regularly.
Manage your taxes.
There are a lot of changes related to taxation coming in 2018. Make sure these things don’t take you by surprise. Plus, if you aren’t filing your taxes properly, now’s the time to make sure you do that. After all, you don’t want to risk heavy penalties from BIR for failing to file the right taxes at the right time! And to make things easier for you, make sure you check out Taxumo and the services we offer, which are ideal for freelancers, entrepreneurs and mixed-income professionals.
Do you have a recommended must-do for 2018 I didn’t get to list? I’d love it if you’d share in a comment. We all have our personal goals this year, and it would be great if we could work toward them together!
A lot of people have been discussing the TRAIN law and how will it affect us. I’ve been reading about it and I’ll be sharing some of the things that I read about with you. Also, I’ll be sharing a Philippines BIR Tax Software that I have been using.
What is TRAIN?
President Rodrigo Duterte signed the Tax Reform for Acceleration and Inclusion (TRAIN) into law last December 19, 2017. It’s the first package among the other tax reform measures to be issued by his administration. It expected to make a considerable impact on the prices of goods and services, take-home pay of Filipinos and their purchasing power.
About 70% of collected revenues will go to infrastructure projects that the Duterte’s administration plan to build. His administration has planned to allocate P8.44 trillion for its “Build, Build, Build” program for 2017-2022. They plan to build more road networks and better mass transportation rides for the public. These will enhance the economy and create more investment opportunities, thereby creating more jobs or income sources for the Filipinos.
The other projects under the 70% collected revenues are the following: infrastructure for the military, drinking water facilities in all public places and sports facilities for public schools. The remaining 30% will be spent on social mitigating measures and investments for health, nutrition, hunger and education.
What is it to Employees?
Under this law, there is a zero percent tax for low-income earners with an annual income of P250,000 and below. Those with an annual income of P8 million and above are taxed with 35 percent. The 13th month pay and other bonuses at P90,000 and below will remain not to be taxed. This new law lightens the financial burden among low-income earners. With the previous income tax law, about 5 percent is deducted from earners with P10,000 and below income. Those with an annual income of P500,000 and above get to have 32 percent of off their income.
What is it to us Business Owners, Freelancers and Professionals?
For business owners, sole proprietorships and licensed and non-licensed individuals, those earning below Php 250,000 per year will be tax exempt. Those who earn Php 3 Million and below per year now have the option to file and pay for a 3% percentage tax + income tax (paid quarterly) or an 8% percentage tax of gross receipts (paid annually).
Although the 8% percentage tax paid annually may seem attractive, you may want to check what is better for your business. There is still a level where 3% percentage tax + income tax (paid quarterly) is a better option.
Here’s how to check:
One – Download this calculator by a my friend Mark Ong, who is a CPA.
The BIR placed a higher tax rate on coal, mining, tobacco, sweetened beverage petroleum, and automobiles. Some may not find it as good news. They fear that companies will increase the prices of their goods for consumers to shoulder the higher tax rates.
Everyone’s awaiting the other packages and the Implementing Rules and Regulations of the BIR. If you want to know more about the Philippines Tax Reform law, join the workshop of Manila Workshops on January 27. Check it out in this link: http://manilaworkshops.com/events/understanding-tax-reform-for-msmes-self-employed-professionals-freelancers
Personally, our team in Taxumo studied the law and thought about how to easily cascade it to our users. If you haven’t checked out this Philippines BIR Tax Software, you should. It really makes your life as an entrepreneur, freelancer and professional easier. How? Taxumo is the first in the industry to have automated calculations of your tax dues. And guess what? The Taxumo Income Tax calculations now uses the formula from the TRAIN law (RA No. 10963).
Once the Implementing Rules & Regulations are released by the BIR, Taxumo will be updating the forms & formula speedily and accurately to make sure that you’re using the latest forms when you’re filing your taxes.
If you want to try out Taxumo, sign up now for a FREE trial.