How to Register with the BIR (for Professionals)

Apr 28, 2011 by at Law & Government, Tax Tips, Taxation

How to Register with the BIR (for Professionals)

How to register with the Bureau of Internal Revenue (BIR) as a self-employed professional in the Philippines? A self-employed individual can be either a person who is engaged in business (sole proprietorship) or a person who practice his profession. In this article, we will tackle the registration of professionals with the BIR. Recently, I have received a lot of questions from freelancers regarding with their taxability. I have also encountered some Filipino online money earners (bloggers, web designers and other online service providers) on online forums, discussing about whether they should register with the BIR and pay their taxes or not. My other tax articles, especially the article about “how to compute income tax of self-employed persons” have also received comments from freelancers who want to register with the BIR and pay their taxes for the first time. To address those questions, let’s start our discussion.


Who are considered as professionals?

Professionals are those who practice their profession or calling, “with or without” license under a regulatory board or body. Professionals with license under a regulatory board include Certified Public Accountants (CPAs), practicing lawyers, doctors of medicines, dentists, architects, engineers and teachers. Bloggers, internet marketers, web designers, writers and other persons who provide specialized services can also be considered professionals, though they may not have professional licenses under a regulatory body. Professionals, for the purpose of this article, are self-employed individuals, and exclude those who are earning purely from compensation income (purely employees).


Should professionals register with the BIR?

Section 236 (j) of the Tax Code, states that any person, whether natural or juridical, required under the authority of the Internal Revenue Code to make, render or file a return, statement or other documents, shall be supplied with or assigned a Taxpayer Identification Number (TIN) to be indicated in the return, statement or document to be filed with the Bureau of Internal Revenue, for his proper identification for tax purposes. Thus, professionals who are required to file tax returns, like income tax return, should register and obtain a TIN with the BIR. Remember that you cannot file your income tax return without a TIN – the TIN must be indicated in the tax return.


Who are not required to file income tax return?

Let’s take a look on the following list of individuals who are not required to file income tax return, and let’s see if professionals and freelancers are also required to file income tax return.

Individuals who are not required to file income tax return.

(1) An individual who is a minimum wage earner (visit this DOLE page to see the current regional daily minimum wage rates).
(2) An individual whose gross income does not exceed his total personal and additional exemptions
(3). An individual whose compensation income derived from one employer does not exceed P 60,000 and the income tax on which has been correctly withheld
(4). An individual whose income has been subjected to final withholding tax (alien employee as well as Filipino employee occupying the same position as that of the alien employee of regional headquarters and regional operating headquarters of multinational companies, petroleum service contractors and sub-contractors and offshore-banking units, non-resident aliens not engaged in trade or business)
(5). Those who are qualified under “substituted filing”. However, substituted filing applies only if all of the following requirements are present:

a) the employee received purely compensation income (regardless of amount) during the taxable year
b) the employee received the income from only one employer in the Philippines during the taxable year
c) the amount of tax due from the employee at the end of the year equals the amount of tax withheld by the employer
d) the employee’s spouse also complies with all 3 conditions stated above
e) the employer files the annual information return (BIR Form No. 1604-CF)
f) the employer issues BIR Form No. 2316 (Oct 2002 ENCS version ) to each employee.

Take note that Items 3 and 5 pertains to employees, and item 4 also usually pertain to employees (though an individual whose total income is only derived from interest on bank deposits, which is subjected to final withholding tax, can be included in this item). Number 1 may also refer to employees, since the term “wage” according to the Labor Code is defined as all remuneration or earnings paid by an employer to a worker for his services rendered. Thus, we can tell that self-employed individuals, such as professionals, may not only be required to file income tax return if they are qualified under the condition in number 2, i.e., if his or her gross income does not exceed his total personal and additional exemptions. For example, if you are a single person whose gross income only amounts to Php 50,000 during the taxable year, you are not required to file income tax return because your gross income for the year doesn’t exceed your personal exemption of P 50,000 (for single taxpayers). Gross income means the difference of your total Sales/Receipts/Revenues/Fees minus your total Cost of Sales/Services. So if you averages monthly gross income of P 4,500 (P 54,000 a year), and you’re single with no dependents, you’ve got to file you income tax (BIR form 1701/ 1701Q).


What are the benefits and advantages of professionals who register with the BIR?

If you are a professional, who’s required to register as a self-employed individual, but still not registered with the BIR and not filing income tax returns, the following are the things you must consider.

1. Your annual income tax return (BIR form 1701) will serve as you proof of earnings, which you can use for obtaining loans with different institutions, such as banks, credit cooperatives, lending companies, SSS and PAG-IBIG. You can also use it to apply for credit cards.
2. By being registered with the BIR and having official receipts (OR) under your name, your clients will have more confidence of getting your services.
3. You can save money in the future by paying your taxes on time and avoiding penalties, such as interests, surcharges and compromise.
4. You will not be charged with tax evasion, which is punishable by the law.
5. and other ethical and moral benefits, such as having a clear conscience and having good night sleeps.


How to change from being a pure employee to a self-employed individual?

If you are previously employed and have recently decided to escape from employment and become your own boss, you may be asking how to change your status as a pure employee to a self-employed taxpayer? Usually, employees have already their TIN numbers. Thus, their existing TIN will remain as their tax identification numbers for tax purposes (you can only have one TIN in your entire life). Individuals who are both practicing their profession and at the same time employed with a company/employer (those who receive mixed income from practice of profession and compensation income) are also considered self-employed taxpayers for registration and tax purposes. Please read below the procedures and requirements for registration of professionals.


Steps and requirements for registering with the BIR

Tax Forms you will use (click on the form to download)

BIR Form 1901- Application for Registration for Mixed Income Individuals, Estates and Trusts
BIR Form 0605 – Annual registration fee
BIR Form No. 1906 – Authority to Print for applying Invoices/Receipts

You also need to provide books of accounts (simplified books of accounts or journals and ledgers) for registration with the BIR.

Documentary Requirements

1. Birth Certificate or any documents showing name, address, and birth date;
2. Mayor’s Permit, if applicable;
3. DTI Certificate of Business Name to be submitted prior to issuance of the Certificate of Registration or BIR Form No. 2303, if applicable (if you choose to not register a trade name and only choose to use your name as the registered name, you don’t need to submit DTI certificate;
4. Professional Regulation Commission ID, if applicable; and
5. Payment of Professional Tax Receipt (PTR) from the local government, if applicable

Steps / Procedures
1.) Accomplish BIR Form 1901 and submit the same, together with the required attachments, to the Revenue District Office having jurisdiction over the registered address of the business establishment. If you already have a TIN, then supply your TIN on the form. Your application as a self-employed person will be faster if you already have an existing TIN.

Note: The Professional may electronically secure TIN through e-TIN at the BIR Website at www.bir.gov.ph or the BIR Portal at www.my.bir.gov.ph

2.) Pay the registration fee of P500.00 using BIR Form 0605 (Payment Form) to any Authorized Agent Bank (AAB) located within the RDO

3.) Pay P 15.00 for the Certification Fee and P15.00 for the Documentary Stamp Tax (in loose form to be attached to Form 2303).

4.) Attend the required taxpayer’s briefing at the RDO before the release of the BIR Certificate of Registration (COR) or BIR Form No. 2303, which reflects the returns that must be filed and the taxes to be paid. The BIR will also provide you An “Ask for a Receipt” Notice (ARN), which must be posted conspicuously in your office or business establishment, together with your COR (BIR form 2303), Application for registration (BIR form 1901 for self-employed) and current registration payment form (BIR form 0605).

5.) Apply for Invoices/Receipts using BIR Form No. 1906 – Authority to Print. Usually, the BIR accredited printing press who will print your receipts can assist you on the registration of your official receipts or invoices. Your receipts or invoices should be serially numbered. It also indicates your name, business style (profession), TIN and your registered business /office address.

Receipts or invoices shall be issued by the Professional for every payment received. The original of each receipt or invoice shall be issued to the client at the time the transaction is effected and the duplicate shall be preserved in the place of business for a period of 3 years from the close of the taxable year.

6.) Register books of accounts (Journal / Ledger / Subsidiary Professional Income Book and Subsidiary Purchases/Expenses Book) and have them stamped by the RDO where the Professional is registered. Professionals are required to maintain books of accounts using any acceptable method of accounting (accrual or cash basis) in a consistent manner. The same shall be preserved within the prescriptive period (3 years from the close of taxable year) for post audit examination.

For professionals whose quarterly revenues exceed one hundred fifty thousand pesos (P150,000.00), they shall have their books of accounts audited and examined by an independent Certified Public Accountant (CPA) in order to give an independent opinion regarding its financial condition. In addition, their annual returns shall be accompanied with certified balance sheets, profit and loss statements and other relevant documents.

There you are, I hope this will serve as your guide on your way to registering yourself as a professional with the BIR. We will update this article for more important information that will come to our knowledge in the future. For other related tax articles and resources for professionals, please read the following:

What taxes should self-employed pay with the BIR?
How to compute annual income tax (for self-employed)
How to compute percentage tax (for Non-VAT registered professionals)
How to compute VAT payable (for VAT registered professionals)
Tax guide in the Philippines (links to our tax resources)
Tax guide for professionals (published by the BIR)

Reference:
Sec 1,Rule VII, Book 3, Omnibus Rules Implementing the Labor Code
BIR income tax info
BIR registration info

Disclaimer: Though this article was based on reliable resources and comprehensive research, this article was provided for educational and informational purposes only, and doesn’t constitute formal professional advice. New laws, rules, issuance, and regulations mar render this article obsolete or inaccurate in whole or in part. For more clarifications, please visit and inquire personally with your RDO.

Victorino Abrugar is the founder and chief writer of BusinessTips.Ph. Vic is a social media enthusiast who loves to share his knowledge and insights through blogging. He provides business coaching to aspiring small business owners and entrepreneurs to help them reach their business and life's goals. Follow him on Twitter at @viclogic or interact with him on Facebook.

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27 Comments

  1. Nice Information and really helpful. I have also subscribed the RSS of the website to get regular updates, Looking more information on the same!

  2. wow, another great site where we can learn helpful tips. More power!

  3. May this reach out many professional who are not registered.

  4. Loid

    Thanks for this info but do I have to register myself as a professional? Can’t I just fill out the 1701 form? Or registration is required for my 1701 to be processed? I started to work as a freelance, web content writer just last year. I have 2 long-term clients, one from the US and the other from Australia but no contracts involved. If I’m going to register, I will have to issue receipts? That would just make things even more complicated. I really wanna pay my taxes, for requirement purposes and because I wanna have “goodnight sleeps” but it’s so complicated and not much info available. :( I really appreciate your posts btw.

  5. Hi Loid! Let me share my views. Yes, I believe you do have to register with the BIR because it becomes your normal trade or business and taxes are due thereon. Since your clients are non-residents and I believe they pay in foreign currency through inward remittance, it could qualify under zero-rating for VAT purposes. You will be liable to pay income tax quarterly and annually, maintain books, issue OR to them. Should they withhold income tax abroad, then, you may use it as tax credit for your Philippine income tax based on proofs of withholding that they will provide you.

    It is good to know you are making steps to comply. Our seminars on BIR compliance may help you with your good intentions.

  6. brian

    Hi!

    I learned so much from your BIR posts, thanks a million. Having said that, now I know I made so many mistakes in filing my annual 1701. All the while I’m filing it for 5 years without being registered as a self-employed professional, and not filing the Quarterlies and monthly PT. Will I be penalized for that, am I going to jail for this? My status (residence, thus new RDO number) have also changed and have not filed it, you think I should still file?

  7. Joey

    Hi,

    I’m planning of setting up a business promoting shows. I just got back here in the Philippines after having lived abroad for eight years. My question is, should I register as a professional? My first major project is to promote a university theater group to do a number of paid cultural shows in schools and other venues. What would I be taxed for this? Your input is highly appreciated. Thanks.

  8. Melody

    I’m just wondering what’s the difference between registering as a professional and as a sole proprietor or are they one and the same?

    I’m a designer and sometimes I have to outsource my projects. Since the project will be billed through me, how do I go about registering with DTI and how do I go about BIR taxation?

    Do I register as a professional still? And if I do, does my contractual/outsourced Java Developer count as an expense? Do I withhold 10% from his fee as well?

    Or do I register as a sole proprietor? This is of course assuming there is a difference between the two.

    Help! As you can see I’m really confused. Any help would be very much appreciated! Thanks!

    • Vic

      They are just the same self-employed individuals. The other is a self-employed individual receiving income from his business, while the other is receiving income from practicing his profession. But they are just the same when it comes to taxation (similar BIR forms used and file). If you will just use your personal name, and will not use a trade name, you don’t need to register with the DTI. You can visit BIR for more information. All the expenses related to the practice of your profession, where you generate income in return can “generally” be claimed as your expenses.

      • Do you mean to say that even if I register as a professional, I will still need to get a business permit annually with the municipal hall? Is there really no difference? Currently, I write for magazines, and they withhold 2% of my payment because they classify me as subcontractor. If I registered as professional, would they not be compelled to withhold 10% instead? As a professional, will I still be allowed to include “Withholding tax – expanded” among my registered activities?

        Please excuse my asking so many questions. I am currently registered as a sole proprietor, and I am now wondering if I should have registered as a professional instead. My business: I write articles and edit other people’s writings.

        Many thanks in advance!

    • ilokano

      I am having the same problem. This post is very helpful. So it’s ok pala not to register sa DTI if I plan to use my own name. There are no advantages to registering a business name instead?

      I am a web designer too and I would rather not deal with these things. I was wondering if there are people I can contact (freelance accountants) who can do bookkeeping and also to sort out tax documents. Magkano ba kaya ang bayad nila?

      • Vic

        If you have a trade name which you don’t want to be registered by other company, you may register it so that it will be secured.
        Hmmm. Bookkeeping cost depends on the difficulty of work. They can go as low as a thousand and as high as 100T.

  9. Kate

    I’m currently working for one long term client (freelance, online, direct to bank payment for every project completed) and teaching part-time at a local university. Currently, the university deducts taxes and gives me BIR form 2306 every year. I want to start paying taxes for the freelance job (since I earn more and it will show a bigger income whe applying for credit cards, loans, visas, etc). How would I go about doing that? How will I use form 1701?

    • Vic

      You can register as a self-employed professional as stated in the article above. As a self-employed, you will use 1701 for filing your income tax return. You can simply attach your 2306 form to your 1701.

  10. Nathan

    Hi, this is an awesome post!

    I’ve been a freelance writer since 2009 (I was 20). At first, my income was low (and I was intimidated to go to the BIR) so I didn’t file for an ITR. Mid-year, I raised my rate. I’ve always wanted to pay taxes and file ITR but every time I try to research the process, I get confuse with all the details so I postpone my filing. But this year, I really want to pay my taxes. Will the BIR penalize me for not filing/paying my taxes for the previous years?

  11. Divine

    Does a General Professional Partnership still required to file an Income Tax Return -quarterly and annually even if they are not subject to Income Tax?

  12. Joyce

    Hi! This is a very helpful site, thank you for posting.

    Just want to ask, given the documentary requirements above to complete the registration, do I have to apply for a Mayor’s Permit given my work situation being a Virtual Assistant for one U.S based company with no existing operation here in the country? Is that required? And also with the PTR, does this apply with my case?

    Hoping to hear feedback the soonest!

    Thanks!

  13. anne

    Hi! I’m a real estate broker. I recently passed the exam. I am really confused about the wholr process. If i am going to register with dti but will only be holding office at home, do i still need to obtain a mayor’s permit. We’re also renting so i am not sure if it is required by bir to have the contract for the house.

  14. Bibo

    You don’t need to pay taxes if your client is based outside the Philippines.

    • Hi. If you are a Filipino resident citizen, you may be required to file and pay your taxes on your income from sources within or outside the Philippines. Take for example Manny Pacquiao, Manny still files and pays his taxes on income from local and abroad, less his tax credits from taxes he has already paid in abroad.

  15. cristina chua

    hi! i applied for a e-tin(self-employed) so that i could use it in applying for a business name, apparently, the application process’ already asking me about business name address, etc.. and obviously, i dont have any to fill in, i did not proceed with the application, does this mean that my application is incomplete? I am quite scared of the consequences if my application went wrong, i don’t want to be penalized for it nor have problems in the future! what can i do about it? thank you!

  16. kris karl

    Thank you for providing such a tax resource blog like that online. I have a question about my current job. I have been hired by a Florida based company from the US as a contractor to perform daily systems monitoring for their client remotely while I am here in the Philippines. I have been doing this job for two months now. My question is, as a Filipino resident, am I still required to pay taxes here in the Philippines even though my employer is from the US? If yes, which category should I fall into? Please advise. Thank you very much.

  17. reden

    hi sir!

    I’m plannning to be a self-employed professional. my question is, is the percentage tax withhheld by client be deductible as expense or is it deductible as tax credit?

    thanks!

  18. Astrid

    I’m also a licensed real estate broker and i’m very new in the industry. I’m not sure if i should register as a professional or if it would be better to secure a trade name through DTI? I read in another thread that I don’t need to secure the usual govt.permits if i were to register as a professional. is this true?

    What’s the difference if i register as a professional versus a sole proprietorship?

    Hope to get your feedback. Thanks.

  19. Je Detosil

    Sir,
    I have also a problem about my small design services as my other source of income. I normally worked as employed to a company which my TIN is regularly paid. My problem is, how is it acceptable to issue a written acknowledgment receipt to my sideline clients
    since I have no office, I am just renting a small house where I live with family. I just gave them acknowledgment receipt as a proof of my design services. My question is, Am I obliged to be having a tax on my sideline income besides I regularly pay my tax as an employee? I hope I can have a clear answer for these! Thanks Sir…

    JD

    • Basically, you have to register as a mixed income earner which is just like registering as a self-employed individual or professional. You need to have official receipts, and not just acknowledgement receipt, since your clients can compel you to provide them official receipts if they wish to have OR for their accounting and bookkeeping purposes. We can discuss this matter further in our official forums at http://businessforum.ph

  20. Jennie

    Thank you for this post. I learned a lot.
    I have a question though, I’m a full time employee and a licensed part time insurance agent and the insurance company now requires me to obtain an official receipt before I can get my commission. I’m changing from employed to mixed income earner, so I van get an ATP, but im not sure which RDO I should go. Since I work in Makati, my listed RDO is RDO 50, but I live in Las pinas and plan to use our home address as the address on the receipts, should I file the 1901 on RDO 50 or RDO 53, which is in Las Pinas?

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