How to Pay Taxes as a Freelancer or Self-Employed?

Do freelancers have to pay taxes in the Philippines? How much tax should I, as a freelancer, pay? How can freelancers get something called an ITR?

You might have heard these questions and more in various chats online or in person. A lot of freelancers in the Philippines don’t really know much about how to file and pay their taxes. This is because the rules for freelancers are not as straightforward as they are for people who work for companies or for businesses.

Even so, it’s important to know what taxes you need to pay to the government. Keep reading to learn about the basics of taxes for freelancers in the Philippines.

Remember: This article is just to give you a general idea and isn’t a replacement for advice from a professional.

Table of Contents

Do Filipino Freelancers Need to Pay Taxes?

Yes, they do. Freelancers, whether they work part-time or full-time, need to pay income tax. This applies whether their clients are in the Philippines or in other countries. For example, people who work from home and earn money online (like web developers, writers, SEO specialists, and graphic designers) are included in this.

If freelancers in the Philippines are working with clients from other countries, they can use the tax they pay in that foreign country as a “tax credit”. Basically, this means they won’t have to pay taxes in that foreign country.

The reason why it’s a bit confusing about whether freelancers should pay income tax is because the National Internal Revenue Code (which is also known as the Tax Code), doesn’t specifically say anything about “freelancers.”

But, freelancers can be considered as either self-employed people or as people earning mixed-income, depending on what kind of work or business they’re doing. In the Philippines, both self-employed and mixed-income earners have to file and pay income tax.

How Can You Become a Registered Freelancer in the Philippines?

In the Philippines, freelancers, like other people who earn money, need to register with the BIR (Bureau of Internal Revenue). They register as either self-employed or mixed-income earners and need to get a Taxpayer Identification Number (TIN) if they don’t have one already. The way freelancers register is a bit different from others.

The first thing you need to do to be able to pay your freelance taxes is to register with the BIR.

Here are the steps to do that:

Fill out a form called BIR Form 1901. This is what you’ll use when you register with the BIR.
If you need to, apply to change your RDO (Revenue District Office) by handing in a form called BIR Form 1905 to your old RDO. According to some rules (specifically, Revenue Memorandum Order No. 37-2019), your tax records should be at the RDO that looks after the area where you live. So if you’re becoming a freelancer and your registration records are still kept outside of where you live, you need to give the right form to your old RDO to move your records to your new RDO.
Get an Occupational Tax Receipt (OTR) from the town or city hall that looks after the area where you live. You’ll need to bring ID that shows you live at the address you’re using to register. The cost for the OTR depends on your town or city hall.
Go to the BIR RDO that looks after the address where you’re registering as a freelancer and hand in the documents they need. These are the filled out BIR Form 1901, the stamped BIR Form 1905 (if you’ve applied to change your RDO), and the OTR. As a freelancer, you can choose on your BIR Form 1901 to pay your income tax at a flat rate of 8% instead of the sliding scale rates that are more for businesses and people with bigger expenses.
Wait for your Certificate of Registration (COR) to be given to you. Once you have your COR (usually within 1 to 5 days), ask someone at the BIR where to get the official Receipts Booklet and accounting book. These will be your records in case the BIR asks for them.

What Kind of Taxes Do Freelancers Need to Pay?

After you’ve registered with the BIR, there are different types of taxes you need to know about. Most of these are income taxes and business taxes. You can find this information on the BIR Form 2303 (Certificate of Registration) that you got when you registered with the BIR.

1. Annual Registration Fee

How much: Php 500 every year
Who needs to pay: All self-employed and mixed-income individuals
What form to use: BIR Form 0605 – Payment Form
When to pay: By January 31 each year

2. Quarterly Income Tax

How much: Based on BIR’s income tax rate table or the 8% special tax rate, whichever applies to you
Who needs to file and pay: All self-employed and mixed-income individuals
What form to use: BIR Form 1701Q – Quarterly Income Tax Return
When to file and pay: May 15 (for the first quarter), August 15 (for the second quarter), and November 15 (for the third quarter) each year

3. Annual Income Tax (for the last quarter of the tax year)

How much: Based on BIR’s income tax rate table or the 8% special tax rate, whichever applies to you
Who needs to file and pay: All self-employed and mixed-income individuals
What form to use: BIR Form 1701 or BIR Form 1701A – Annual Income Tax Return, whichever applies to you
When to file and pay: By April 15 of the next year

4. Quarterly Percentage Tax

How much: 2% to 30% of total sales and/or receipts

5. Monthly Value-Added Tax

How much: Generally, 12% of total sales (for those selling goods) or 12% of total receipts (for those selling services); there are also transactions that are exempt from VAT
Note: Starting in 2023, VAT returns will only need to be filed and paid every quarter. You won’t need to file and pay VAT every month anymore.

6. Quarterly Value-Added Tax

How much: 12% of total sales (for those selling goods) or 12% of total receipts (for those selling services)
Who needs to file and pay: Self-employed and mixed-income individuals whose total annual sales and receipts are more than Php 3 million
Who doesn’t need to pay: Self-employed individuals who use the 8% special tax rate
What form to use: BIR Form 2550Q – Quarterly Value-Added Tax Return
When to file and pay: By the 25th day of the month after each taxable quarter

7. Expanded/Creditable Withholding Tax

How much: 1% to 15% of total income

How Can Freelancers Get Their Income Tax Return (ITR)?

Freelancers are treated like businesses, which means they need to file their tax returns, just like businesses do.

If you’re also working as an employee, you should ask your employer for a form called BIR Form 2316. This form helps you claim the taxes that were already taken out of your pay.

To get your ITR, you just need to file the right form with the tax office, which is called the BIR. If you’re self-employed and using the itemized deduction under the graduated income tax rates (which means your taxes are based on how much you earn), or if you have different sources of income, you should use a form called BIR Form 1701. If you’re self-employed and using the 8% tax rate (which is a special lower rate), or the optional standard deduction under the graduated tax rates, you should use BIR Form 1701A.

After you’ve filed and paid your income tax, the BIR will give you a copy of your ITR that has been stamped and validated. This is your proof that you’ve filed and paid your income tax for that year.