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  • 5 Things You Need to Know about Freelance Tax

    05 May 2021


    5 Things You Need to Know about Freelance Tax banner

    Being a freelancer is the dream for some young professionals. It offers freedom as you have more control over your time, allows you to work from the comfort of your home, and lets you effectively manage your workload according to your level of prioritization.

    However, the flexibility of being self-employed also entails a huge responsibility. As a freelancer, you are still bound to the Philippine laws of paying your taxes. 

    The Bureau of Internal Revenue (BIR) classifies self-employed individuals as persons who derive their income from a profession with or without a license from a ruling board and those who make their living from doing art, like writers and artists. 

    Filing and paying taxes may sound intimidating and overwhelming to do on your own. If this is your first time doing so, there are certain things you should keep in mind to help mitigate the stress.

    1. Identify which income bracket you fall under

    To know how much tax you need to pay, you must first identify your income bracket. 

    People who have an annual sale or professional fees that do not exceed P250,000 a year will not be paying any tax. But if you belong to this bracket, you still need to file an ITR or Income Tax Return. 

    If you earn an annual income of P250,000 but do not exceed the VAT threshold of P3,000,000, you have the option to pay 8% of income tax from your gross sales and other non-operating income or pay the graduated tax rates. People who can avail of the 8% income tax regime are those who earn from businesses or professional fees. 

    2. Determine your business structure

    Besides knowing your income bracket, you also need to identify the business structure you have to register for. For freelancers, it can either be a professional or sole proprietor.

    A sole proprietorship is a type of unincorporated business owned and controlled by only one person. In this case, the owner pays personal income tax on the profits earned. You can register through the Bureau of Trade Regulation and Consumer Protection under the Department of Trade and Industry.

    If you own a small business, you can register it under sole proprietorship.

    Meanwhile, professionals are self-employed individuals who earn money by practicing their profession with or without a license. This includes lawyers, private physicians, graphic designers, photographers, and other workers on a pay-per-service basis. 

    If you’re only getting paid through the services you provide sans the benefits of being employed, then you can register as a professional. 

    3. Know the first steps

    Now that you’ve established your business’s identity, you can begin to familiarize yourself with the requirements and steps to take before paying taxes. For a complete list, you can visit the BIR website.

    The first thing to do is to fill out the BIR Form 1901 or Application for Registration and submit it together with the documentary requirements to the Regional/District Offices (RDO) near you. If you already have a Tax Identification Number, you should fill out the BIR Form 1905 or Application for Registration Information Update. 

    After that, you’ll pay the annual registration fee of P500 at the New Business Registrant Counter in the BIR Office. You will also pay for the certification fee and documentary stamp tax worth P15 each. 

    The RDO will then issue the Certificate of Registration (Form 2302), including the Notice to Issue Receipt, Authority to Print, and BIR Printed Invoices. You can register your books of accounts to the same RDO you registered at. 

    4. Get help from professionals

    If you don’t want to burden yourself with managing taxes, you can consider getting help from professionals.

    It may be manageable at first, but if your financial status often changes and your services and business continue to grow, you may opt to look for an accountant adept in freelance tax regulations. Remember that every transaction matter, so if you can’t keep up with your receipts, then it’s okay to ask for an expert’s help. 

    5. Plan for your future!

    As a freelancer, you won’t have access to government-mandated benefits, HMO, and other benefits from being a regular employee. It’s essential to take action and look at investment options yourself. To help you out, BPI AIA offers affordable health insurance plans to safeguard your health. 

    Be a Responsible Professional

    Paying taxes is indeed overwhelming at first, but this is only the beginning of your freelancing responsibilities.

    The future is right at your corner, and what better way to face it than to prepare and plan for it? Remember that filing your taxes is essential so you can claim taxpayer benefits and have access to requirements for other financial services such as loans and travel documents.

    When it comes to providing financial security, BPI AIA makes it easy for you to get insurance with investment, even in this pandemic. You can talk to one of our Bancassurance Representatives online through our official website.

    Live Longer, Healthier, and Better

    Invest in both your health and wealth with BPI AIA Wellness Series

    AIA Vitality

    RECOMMENDED PRODUCTS

    Life Ready Plus

    Protection

    Get the power to protect yourself and your family with an affordable life insurance plan. Life Ready Plus is easy on the budget, but offers coverage of up to 30 times your yearly payment to support the financial needs of your loved ones.

    The plan gives you fast access to coverage and benefits and can match your long-term financial goals when maintained within an appropriate term.

    Philam Life Vitality

    Critical Care Max

    Health

    Critical Care Max will help you make more memories by providing financial aid during the early stages of a critical illness. This unit-linked life and health insurance plan offers assistance on your recovery. You can build a health fund that grows over time, depending on your chosen investment, to pay for other medical costs.

     

    In addition, it comes with a hospital confinement benefit that will replace lost income due to hospitalization. This daily cash benefit may also come with optional benefits like cash payout for surgery-related expenses, allowance for consultation fees, and many others.

    Philam Life Vitality

    Build Estate Plus

    Life Protection

    Let your loved ones enjoy the fruits of your labor even when you’re no longer around. Build Estate Plus is a unit-linked protection plan that will cover your estate taxes after your passing so that you can ease your family’s burden.

    It doubles as an investment savings fund that builds Account Value as you pay. It is also integrated with AIA Vitality that provides additional upfront coverage of 20% to your policy and add-ons.

    Philam Life Vitality

    CRITICAL CARE PLUS

    Health

    Be in good hands in times of sickness. Let Critical Care Plus, a unit-linked health and life insurance plan, take care of you with financial aid in case of a major illness, so you can focus on getting better and spending more time with your loved ones.

     

    It even gives you more benefits for having good health through the AIA Vitality program that adds 20% upfront coverage and supplemental benefits on your policy. 

     

     

    Philam Life Vitality
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