What taxes should you pay in the Philippines? What taxes should self-employed individuals pay in the Philippines? Self-employed taxpayers are those individuals who receive income from business or from practice of profession. Persons who receive mixed income (income from business or practice of profession and income from compensation) are also considered as self-employed and are also taxed similarly.
Self-employed individuals include persons who own business in the form of single proprietorship and practicing professionals (registered or non-registered with the professional commission), such as accountants, lawyers, doctors, engineers, architects, artists and even bloggers. If you are one of them, the following are the ordinary taxes you may be required to pay or remit to the Bureau Internal Revenue (BIR) .
Taxes that are payable monthly
1. Monthly Percentage Tax (BIR Form 2551M)
This is applicable to persons whose gross annual sales and/or receipt do not exceed P1,919,500 (RR 16-2011, RR 3 -2012, as amended). and who are not VAT-registered persons. If paid manually (other than EFPS), it should be paid not later than the 20th day following the end of each month.
To learn more about Percentage Tax, please read our article “How to Compute Percentage Tax Payable in the Philippines“.
Note: Taxpayer can either be VAT registered or NON-VAT registered. Thus, he can be liable to either Percentage Tax or Value Added Tax, but not both.
2. Monthly Value Added Tax (BIR Form 2550M)
This is applicable to persons whose gross annual sales and/or receipt is at least P1,919,500, persons who are required to register as VAT taxpayers and those who have opted to duly register as VAT registered taxpayers. The deadline for monthly VAT is the same with monthly percentage tax.
To learn more about the computation of Value Added Tax payable and filing of the VAT returns, please read our article titled “How to Compute VAT Payable in the Philippines“.
Note:
Monthly VAT returns are not filed on the months that correspond the end of the quarters (i.e., March, June, September and December). Instead, the taxpayer must file Quarterly VAT returns which compute the VAT Payable as of the end of the quarter. Please see #2 of taxes that are paid quarterly.
4. Monthly Remittance Return of Income Taxes Withheld on Compensation (BIR Form 1601C)
If you have employees, you are required to deduct and withhold taxes on compensation paid to employees. The return must be filed on or before the 10th day of the month following the month in which withholding was made. For the month of December, it must be filed on or before January 15 of the following year. EFPS may have different deadlines of filing.
5. Monthly Remittance Return of Creditable Income Taxes Withheld (Expanded) (BIR Form 1601E)
If you are paying for rental, professional services, prime contractors/subcontractors and other income payment subject to Expanded/Creditable Withholding taxes, you are required to deduct and withhold taxes on those income payments. The return must be filed and remitted on or before the tenth (10th) day of the month following the month in which withholding was made except for taxes withheld for the month of December which shall be filed on or before January 15 of the succeeding year.
Taxes that are payable quarterly
1. Quarterly Income Tax (BIR Form 1701Q)
This return shall be filed by the following individuals regardless of amount of gross income:
a) A resident citizen engaged in trade, business, or practice of profession within and without the Philippines.
b) A resident alien, non-resident citizen or non-resident alien individual engaged in trade, business or practice of profession within the Philippines.
c) A trustee of a trust, guardian of a minor, executor/administrator of an estate, or any person acting in any fiduciary capacity for any person, where such trust, estate, minor, or person is engaged in trade or business.
The deadline for filing is shown below:
1st qtr – On or before April 15 of the current taxable year
2nd qtr – On or before August 15 of the current taxable year
3rd qtr – On or before November 15 of the current taxable year
Note: There is no quarterly return to be filed on the fourth quarter, since the taxpayer is filing Annual Income Tax Return where the previous three quarters tax payments are carried forward. Please see #1 of the taxes that are payable annually.
2. Quarterly Value Added Tax (BIR Form 2550Q)
This return is filed not later than the 25th day following the close of each taxable quarter. The term “taxable quarter” shall mean the quarter that is synchronized to the income tax quarter of the taxpayer (i.e. Calendar quarter of Fiscal Quarter). This return shows the VAT payable at the end of the quarter. Please see #2 of the taxes that are paid monthly.
3. Quarterly Percentage Tax (BIR Form 2551Q)
This return shall be filed by the following:
a. Franchise grantees sending overseas dispatch, messages or conversation from the Philippines;and
b. Proprietor, lessees or operators of cockpits, cabarets, night or day clubs, boxing exhibitions, professional basketball games, jai-alai and racetracks.
The return shall be filed and the tax paid within twenty (20) days after the end of each taxable quarter.
Taxes that are payable annually
1. Annual Income Tax (BIR Form 1701)
Aside from the 3 quarterly (1st, 2nd and 3rd) income taxes that you will pay during the taxable year, you will also file your annual income tax return. Please see #1 on taxes that are payable quarterly. This tax return should be paid and filed on or before April 15 of each year covering income for the preceding taxable year.
Please read our article on how to compute Income Tax for self-employed individuals.
Note: When the tax due exceeds P2,000.00, the taxpayer may elect to pay in two equal installments, the first installment to be paid at the time the return is filed and the second installment 15 of the same year at on or before July the Authorized Agent Bank (AAB) within the jurisdiction of the Revenue District Office (RDO) where the taxpayer is registered.
2. Annual Registration Fee (BIR Form 0605)
An annual registration fee of Php 500 should be paid on or before January 31 of the year.
3. Annual Information Return of Income Tax Withheld on Compensation and Final Withholding Taxes BIR (Form 1604CF)
There is no payment to be made in this return for it only reports the summary of Monthly Remittance Return of Income Taxes Withheld on Compensation (BIR Form 1601C) you have paid and filed for the year. Please see # 4 of the taxes that are payable monthly. This return must be filed on or before January 31 of the year following the calendar year in which the compensation payment and other income payments subject to final withholding taxes were paid or accrued.
4. Annual Information Return of Creditable Income Taxes Withheld (Expanded)/ Income Payments Exempt from Withholding Taxes (BIR Form 1604E)
Just like BIR Form 1604CF, this return is only filed to the BIR. It contains the annual summary of your remittance of Creditable Income Taxes Withheld (Expanded)/ Income Payments Exempt from Withholding Taxes to the BIR. Please see #5 on taxes that are payable monthly. The return shall be filed on or before March 1 of the year following the calendar year in which the income payments subjected to expanded withholding taxes or exempt from withholding tax were paid or accrued.
5. Annual Inventory List (only to be filed)
If you are engage in trading and merchandising business, you may have inventory. Thus, you are also required to submit an annual inventory list not later than thirty days after the close of accounting period.
Note:
This article only lists the regular and ordinary taxes that should be paid by self-employed taxpayers in the Philippines. There can be other taxes and returns that may be required to be paid and filed by particular taxpayers, such as Excise tax and other taxes payable per transactions. For more information, please visit the BIR website or inquire at the RDO offices where your business is located. Updates on this post will be provided.
Victorino Q. Abrugar is a marketing strategist and business consultant from Tacloban City, Philippines. Vic has been in the online marketing industry for more than 7 years, practicing problogging, web development, content marketing, SEO, social media marketing, and consulting.
Hi!
Thank you for this information. However, I’m really at a loss to how I will start.
I’m self-employed and I do freelance work. I do virtual assistant jobs with foreign clients. Now, I don’t have any registrations for that work. Meaning, it’s not a set business. I get paid via PayPal and a debit card.
I’ve been doing this for a year and I’m ready to pay my taxes. I’ve never filed for monthly taxes so I’m assuming that I’ll pay everything in one go on April? That’s for annual filing, right?
What are the forms that I need to fill up aside from the 1701? What are the deductions that I can file? I’m recently married so we have no kids yet.
Thanks in advance!
Hi, you should first have a TIN and register with the BIR as a self-employed taxpayer. By registering, you can have your books and Official receipts registered and printed. BIR will issue to you a BIR certificate of Registration BIR form 2303. The taxes you should pay monthly, quarterly and annually will be stated in your certificate of registration. BIR registration fee is P500 annually. If you want to have a trade name other than your name, you may first register with the DTI. If not, you just can register your name with the BIR. I’m also a self-employed professional registered with the BIR. I have OR, books, I pay monthly percentage tax, quarterly income tax, annual income tax, annual registration fee. For more information you can visit BIR and ask for the necessary requirements and BIR forms. BTW, keywords on the name is not allowed on the comments. I’m sorry that I need to change your name to Anonymous. Computation for income tax for self-employed is discussed in this post… http://businesstips.ph/how-to-compute-income-tax-in-the-philippines-single-proprietorship/
Do you have to treat your BMBE business as separate from yourself? Like if your BMBE business earned PHP20,000 for a certain month and at the end of the month, you’ll pay yourself PHP15,000 (because you worked for your business) and keep the remaining PHP5,000 as revolving funds for your BMBE business, do you have to pay “income tax” on the PHP15,000 you paid for yourself? Or is this the “income tax exemption” as prescribed in the BMBE rules?
Hi Noel. Your business as a BMBE sole prop registered and you are one so that your BMBE business’income used for personal matters, I believe is not subject to income tax.
we have a small corporation with one employee with below minimum salary. as a far as i know minimum wage earner is not subjected to withholding tax right? if that is the case, what form should we file to BIR? or what are the steps to do to avoid problem with the agency? your reply will be very much appreciated..thank you!
you still have to file a 1601c form with zero amount if such the case to avoid penalty of non filing. you just need to fill up the form by presenting the salary and below the form fill up also the non-taxable line the same amount.
Good day.
I just want to consult if when do I need to start paying my 2551M? I started my business (SOLE PROPRIETORSHIP) last half way of November 2016. Do I need to pay 2551M in this coming 20th of Dec 2016? I am confused.
you pay the 2551 M before the 20th so you will not accumulate penalty. I pay also my 2551M
Thank God I found this Article!
I have concern about the books that was given to me … I don`t know what to do with them .. We usually hire an accountant to do this stuff before and we`ve decided to just do it on my own instead.. One more thing the EFPS is not letting me register .. I am getting an error saying that my TIN is not in the database / or branch code not correct.. Please help me and also I need the list of bir payments for this year 🙁 And anyone please help me how and when to file annual tax return 🙁 Thanks in Advance
hi! im confused with the various tax that you have to pay if you have a business. my mother has a small carenderia in the province and she has recently filed for bmbe to be exempt from the annual income tax.
however she was advised that the bmbe would not save her from paying the monthly percentage tax. is this true? i dont know if you are familiar with this.
and i want to clarify,how many taxes are there that you have to pay for a business with an annual gross of 250,000?
Hi Aoki,
This article may not apply to BMBEs (Barangay Micro Business Enterprises). With regard to your mother’s business, please check her BIR Certificate of Registration (BIR form 2303). It should state their the taxes that should be filed by your mother. If she is exempt from a certain tax or return, she may still need to file the certain return, but without payment. If her business is duly a BMBE, she should have a valid and current Certificate of Authority (CA) issued by the Office of the City or Municipal Treasurer. To avail the tax incentives, the BMBE shall register as such BMBE with the BIR Revenue District Office where the principal office or place of business of the BMBE is located. This should be confirmed with the RDO in your jurisdiction. I recommend that you visit your RDO and clarify this matter.
Hi Aoki. BMBE exemption covers only income taxes and not business taxes like 3% percentage taxes. Taxes applicable to business does not depend much on the level of income but in the nature of the industry and the transactions. The minimum tax types of a percentage taxpayers are : percentage tax, income tax, documentary stamp tax, registration fee, documentary stamp tax, withholding taxes on compensation, expanded withholding tax, business permits, sedula, and real property tax. Hope this helps. If you intend to know more about Basic Business Taxation, we advocate on educating entrepreneurs like you through our tutorials, seminars, and workshops.
Hi,
Great site. I have been looking for this kind of info all over the web and it seems quite thin but you have done a great job at compiling all the vital stuff into an easy to follow guide.
I am currently heading up a philanthropic enterprise that is starting to invest into micro business loans on a minority shareholding basis to help individuals who show merit, Our aim is to get small business off the ground. We mentor and instruct whilst remaining largely nothing more than a source of 0% start up capital loans.
We will be sure to keep checking on this site! Big thumbs up
Thanks for visiting our blog Levi.
Hi i just want to ask do i need to pay quarterly tax when im already paying my monthly? and what about the tax rate?
look forward for the response.
Best regards!
Thanks levi for visiting. It’s great to hear someone leading a philanthropic enterprise. I wish you all the best results.
Hi!
I dont know how to start my question coz i am confuse with my tax payments!
I am a doctor working in a company claiming that my basic payment is my professional fee therefore, i am being withheld with 10%.
Now, i am asked to pay 3% percentage tax. Please note that this is not my clinic and i just work there, it just so happens that i am a doctor and my pay is called “professional fees” should i pay the 3% tax in addition to the 10% withholding tax?
Thank you for the information. Unfortunately my situation in the company is quite confusing. I am rendering my service as a doctor so i have my basic pay as “professional fee” and commissions on medical services. So, my next question is, if ever, what comprises that 3% percentage tax? Is it an additional to the 10%? Is it deductable to my pf and commssion after the 10%? The receipts issud are that of the company and not of my own.
So you are receiving a basic professional fee plus a commission based on medical services based on ORs issued by the clinic, and being withheld 10% on such professional fees. It appears you are not an employee of the clinic so that he 3% is applied based on gross amount before deducting 10%. Even if you are withheld 10%, still your gross receipts is 100% because the amount withheld is creditable. As such, 3% should be based on 100%
Hi Dok, How you will be taxed would depend on your arrangement with the clinic. If you are a mere employee, then, you will be withheld withholding taxes on compensation based on the withholding tax table (5-32%) and no 12% VAT or 3% percentage tax will be paid. On the other hand, if you are not an employee of the clinic, you may fall under the category of a sole professional practitioner. I would appear that you are independent from that of the clinic so the clinic will just pay your professional fees. In this case, you will be liable to register as a professional practitioner, register books of accounts, register and issue official receipts, and regularly file tax returns with the BIR. More importantly, you shall be withheld 10% if your annual gross income does not exceed P720,000, otherwise, 15% should be withheld. Likewise, you shall be liable for 3% percentage tax if you do not expect to make gross receipts exceeding P1.5M in a year and you register as non-VAT, otherwise you shall be liable for 12% VAT where you can claim input taxes.
Hope the above views would help you. Thanks.
Hi Ghar,
I have two questions related to this post. As I’m a real estate broker, I only get paid commissions by the developer. As you said, 10% of my commission will be withheld. So my 1st question is, if I were to issue an O.R. to the developer, should I base the amount on the gross commission or the net commission? Second, since I’m a VAT registered person, I will also have to file 2550M for VAT. Do I compute the VAT based on the receipt I issued (gross commission or net commission)?
Another question not related to this is regarding withholding tax on employees. As a real estate broker, I’m allowed to have salespersons. For example I have one salesperson who was able to sell a condo unit. The developer will then pay me the commission less the 10% withholding tax, right? I, in turn, depending on my arrangement with the salesperson, will get my share of the money before I pay him his commission. My 1st question is, do I still withhold another 10% of his commission? The 2nd question is, do I file 1601-E or 1601-C? Third question is, is my salesperson required to issue a receipt to me too?
I hope to hear from you regarding these questions, thanks very much!
Jon, please see my view below.
Answer 1. For VAT purposes, it should be based on the gross amount since it is actually the amount of your income. The 10% withheld is still part of it and is still yours because you use it as a tax credits for income tax purposes. For your OR, you issue based on actually received amount, that is the net amount and the amount withheld will be covered by withholding tax certificate.
Answer 2. The withholding would depend on your arrangement with them. If they are your employees, then you withhold withholding tax on compensation on their share, you remit to BIR using BIR Form No. 1601-C, and issue them withholding tax on compensation. On the other hand, if as a separate broker and not employee, you withhold another 10%, remit using 1601-E, issue them 2307, they issue you OR, they maintain books of accounts like you, and they file tax returns like you.
Tax education is really a big thing and simple lapses means a lot. This is where we get our concept of advocating to educate small & medium entrepreneurs by providing tutorials, seminars and workshops at reasonable costs.
Ghar, finally it made sense to me! Thank you very much for your explanation. I need to learn more about bookkeeping. Can you point me to seminars or tutorials that your group holds? I would love to get my co-brokers to sign-up if the price is right! Please e-mail me at manilenio@gmail.com. Thanks again 🙂
Sir, when we ask for an O.R., we see the breakdown as follows:
net amount + VAT = total amount
You’re saying that when I issue an O.R., I should issue based on the amount I actually received, which is the amount that has been deducted the 10% withholding tax, right? Let’s assume the following example:
I sold a condo unit and my gross commission is P100,000. The developer will then withhold 10%, so the net commission that I will actually receive is P90,000. I will then issue an O.R. to the developer, and it will show as follows:
80,357.14 + 9,642.86 = 90,000
Correct so far? Now assuming this is my only transaction for this month. I will then file 2550M next month. I understand that I should attach BIR form 2307 from the developer as proof that my 10% withheld amount was remitted. But as far as the 2550M is concerned, the VATable sales (12A) will be P89,285.71 (from P100,000) or P80,57.14 (from P90,000)?
Thanks and hope you can clarify further 🙂
Hi Jon,
First, I sent you mail on your gmail address for bookkeeping seminar you mentioned in your earlier comment.
If the P100,000 commission is withheld P10% or P10,000, it appears that the P100,000 is exclusive of VAT so your billing could have been P112,000.
If the P100,000 commission represents everything, then, it is overwithheld at P10,000. The computation should be:
P100,000 divided by 112% or P89,285.71 to get the amount VATable. P89,285.71 times 12% or P10,714.29 is the VAT. P89,285.71 times 10% or P8,929 is the withholding tax on commission. Finally, P89,285.71 plus VAT of 10,714.29 less P8,929 or P91,071 is the amount on OR.
Hope this helps clarify your confusion.
Thanks.
Hey Ghar!
Thanks for the immediate response.
My work with the clinic is not my own actually. The receipts issued are under the clinic’s name and the clients I work with are not my own and that of the clinic’s. I know the set up is peculiar and I myself am confused because while I may appear to be a professional, the clinic is not mine and the clients are not mine as well.
With this in mind:
1. Clinic not mine
2. Patients not mine
3. I am not registered nor was I required to be registered by my employer/boss/company/clinic to be registered as a solo practitioner.
Do I have to be the 10% withholding tax and the 5% percentage tax?
Thanks much again!!!!!
Hi Dok. In such case, you are either be a professional independent of the clinic who caters to clinic’s patients by a common understanding with the clinic, or as an employee of the clinic. I suspect that the 10% withholding is as a professional and that the clinic record on its books such fees as professional fees. Accordingly, you will be required to pay 3% percentage tax (not 5%) if non-VAT registered or 12%, if VAT registered. As a professional practitioner, you will also have to maintain books of accounts, register and issue ORs, submit related BIR reports and do your financial statements.
Should you be an employee, then, withholding tax on compensation applies and you shall only be required to file an annual ITR without being required for VAT or percentage tax, books of accounts and ORs.
Hi, just want to ask, what if the HMOs, hospitals do not ask for my receipt, as a registered professional, do i need to file the said income to my percentage tax 3% 2551M? Or only to 1701? Do my income declared in 2551M should tally to the income i will declare in 1701? The hospitals and HMOs just give me the 2307 10% withheld. Hope you will reply. Thank you very much.
Greetings,
Excellent website! I do however have a question.
If a business that trades in corn grains (VAT exempt as per section 109 of the tax code) expects to have gross annual sales above 1.5 million, would this business be required to file monthly and quarterly percentage tax returns instead?
I’m a bit confused on this point, because the BIR website says that percentage tax returns are to be filed for businesses with sales that do not exceed P750,000 per year.
Your advice would be greatly appreciated since my wife and I are considering this type of business.
Thanks and God bless.
Hi Steve.As VAT exempt, sale of corn is no longer subject to percentage tax even if it exceeds P1.5M. It can register for VAT or percentage tax but will not be liable on either of the two with respect to such corn grains sales. P750k rule no longer applies and it is now the P1.5M.
Thank you Ghar!
Your help is very much appreciated.
Hi Vic,
Your site is a great find for moms like me who want to start a business! Here are my questions:
1. I started selling a few bags a couple of months ago. Should I register this as a business? It’s not easy having a business and going to a 9-to-5 job, too, so talagang sideline lang siya.
2. When should I register my sideline as a business? When I’ve been doing this for a year? When it makes a certain amount of profit?
Thank you!
Hello knowledgeable people!
Im planning to set up a small business involving the manufacturing of toys.
Anyways, i need your wisdom for the taxation laws as these are mind boggling ideas to me.
Here are details:
Sole proprietorship– so my salary is wont have withholding tax?
BIR registered would mean i have to pay BIR the income tax monthly, quarterly, and anually (why am i paying for monthly then pay again for the quarter, then another for the anum?)
Aside from that, i have to add a VAT and issue an OR.(correct right?)
Lastly, i have to deduct 10% withholding from employees?
~~just an extra, im a licensed professional so does that mean i have to regester another thing and pay another thing?
Where can i find tax incentive’s and stuff? From school they said that instead of paying tax, it can be made into a scholarship program (which i am more interested assuming business goes well) so would you know details about that?
THanks a bunch!
Hello Ma’am Mael,
We are from BusinessGuide, your partner for success. Our company aims to help people who wants to put up their own business. We provide them quality training for different areas that the Owner’s need…from operation, management training, supplier’s contact and accounting and taxation, etc.
We are pleased to inform you that we will be having an event about Business Taxation including Tax Refund this coming Dec.Dec.13 and 26. Our aim is to provide everyone a knowledge on how to avoid penalties, right computation for taxes and at the same time on how to get refunds from our taxes that we are paying to the government.
This will be held in our office in Ortigas, back of Megamall.
For more details, you may call us at this no: 584-9186.
We would be happy to be of service for you. Looking forward to see you in our training. Thank you!!!
Number 5 (Monthly Remittance Return of Creditable Income Taxes Withheld) is for a withholding agent, right? What if I don’t have anything to withhold, do I still need to file 1601-E?
Yes, filing is still required for registered tax type because 1601E is a reportorial return.
I am part of a partnership business, am i still required to file an individual income tax annually? i don’t have any other earnings and i don’t even get salary as part of the owner of the company, pls enlighten me, your reply would be very much appreciated.
Hi Rich. If that is a business partnership, then no need because your share in the net income after tax is subject to final withholding tax. If a general professional partnership, yes you are required.
What about sss/philhealth stuff? Is that required? I’ve never had a job so I don’t know, I just make money on the internet and I WANT to pay tax.
I just turned 21 and a friend of mine who works talks about sss and other stuff that gets cut from his salary, and he has to get NBI clearance. Do I need any of those?
I’m lost. I found it easier getting to $2k/month with adsense than finding out HOW to pay tax in the philippines. I don’t want to be a useless leech who evades paying tax, I love my country 😀
I suggest you register as a sole proprietorship for online activities where you will be required to file regular returns and pay taxes. SSS, PHIC and HDMF membership may then be made as self employed.
Hi! I have a lot of questions from you because I find this site awesome with these much details.
1. I am a CPA and does not have a proper training from an auditing firm. I have this client, a Forwarding company, that did not file a 1601E for the commissions of their employees for a year, 2550M/Q and 1701 and 1701Q(they started business december 2010 according to BIR). The problem is regarding the 2550M/Q. I’m confused as to how to prepare the 2550M. For thatm I did this but i am not sure if it is right.
*For the Vatable sales, I used the gross sales because there is a VAT declared in the receipt. I have a problem for the 1701 because I cannot declare the commissions as expenses due to the fact that they did not withheld taxes.
* ForVat-exempt/zero-rated, I was asked by their in-house accountant to use the net income as the sales because of the problem stated above. What should be the correct thing to do?
2. Since I just passed the board exam, I started having a client last november 29, 2011 and I have been paid once as a partial payment for my services. This month(January) I will once again be paid. I do not have a PTR yet and I’m planning to get them tomorrow at Caloocan City hall. My problem is I will be starting to work as an employee on Jan. 25 and I have this 1902, 1905 and 2305 to be filled in before i start working. This basically means that I will be considered as self-employed since I am practicing my profession and being employed at the same time. What should I do regarding my taxes? I already have a TIN issued when I was still in college. RDO 032 is written in my TIN ID. I live in North Caloocan, staying in Malate and I will be working in Makati which are different RDOs. What should I do first? I am really confused so I really need your help. Thanks a lot!
HI! I am a professional with my own clinic that is non vat registered. For my own private clinic, i pay the percentage tax of 3%. I am also working as a consultant in another clinic (not my own which is VAT registered clinic). I would like to know if I have to pay for the 3% tax percentage for the income that i’m getting from the VAT registered clinic? In my knowledge, the VAT registered clinic divides my gross income with 12%vat and thus my gross income from them is net of VAT.
I just received a notice from BIR (a pre-audit sheet) citing that I did not pay for the 3% tax percentage for my professional income from the VAT registered clinic. How can I explain myself to the BIR in this situation. Please enlighten me. Thanks for your help.
Hi. If you’re a consultant (not an employee) from that clinic, then you are required to pay for the 3% of your gross receipts from them, that is, your gross professional income received from that clinic as a consultant, regardless of VAT.
Thank you for your reply but I’m sorry i think i’m confused. The Vat registered clinic is dividing my gross income by 12% so my income is net of vat. From the income net of vat, they will then multiply it to my commission rate of 30%. The net commission is then subjected to 10% withholding tax (W1010 Form 2307) Then i still need to subject the net commission to 3% percentage tax? Therefore, i’m subjecting my income to double taxation, 10% expanded withholding tax and 3% percentage tax? Please enlighten me.
Hi Lani.Just a simple note, 10% expanded withholding tax is for your advance income tax payment while the 3% percentage tax is for doing business. They are different and no double taxation, though, 3% percentage tax is a tax deductible expense when you compute your quarterly and annual income tax at 5-32%. We do offer basic BIR compliance seminar and we wish to invite you to develop a wider understanding on how it works. Please click my name to reach our site. Thanks.
Amazing Content,
I’m opening a new office of my company in Manila, Philippines but I had no idea about how to compute all taxes applicable on this operation.
Amazing articles and amazing blog, really nice!!
You taught about everything, about how to compute Monthly taxes, Annual Tax return but you forgot to create an article on how to compute the quarterly payable taxes. I’m I little bit confused about that, I just download the form 1701Q from BIR – I got the table but I’m not sure about how to compute it.
Thanks
I am currently working as a freelance in a BPO company. As such, I would be responsible for my taxes and other stuff usually deducted from regular employees [sss, pag-ibig, philhealth]. My question now is what will be the computation of a Php20,000 monthly income and how will I go about paying the taxes? Can you provide a detailed computation of it so I may be able to do it in cases that my income would change?
This would be my first time to pay taxes therefore I have not accomplished the forms and the steps required.
Thank you very much in advance.
Hi David, tax compliance procedures for freelance would take time to discuss in this forum. Instead, I invite you to our seminars on basic business accounting and BIR compliance. Thanks.
I have been freelancing for more than a year as a copywriter with ad agencies and have recently registered myself as Self-Employed. I have several questions: 1. Do I need to issue receipts? I was told by the BIR officer to issue receipts, but I was also informed by the finance person at one of the agencies I freelance with that I do not need to do this, since I already have contracts which indicate how much I earn, and how much tax is witheld. So which is which? Do I need to issue receipts or not? All the agencies I work with do not ask for receipts. They give me contracts ranging in length from 5- 15 days. FYI, the finance person I spoke with used to be connected with the BIR so he seemed pretty confident that I did not need to issue receipts. 2. I recently paid my monthly percentage tax, because it was indicated in my papers that I need to pay this. However, again, I was told by several people that I do not need to pay this, and have in fact, been advised to have this removed by updating my status (?) at the BIR. The reason I’m raising these questions is, one other friend who is a freelancer with agencies on short-term contracts, just like me, was NOT required to pay monthly percentage taxes by the BIR. We registered ourselves as Self-Employed a month apart, and we work in exactly the same manner. So how come I have to pay percentage taxes, and she isn’t? Also, she was not asked to issue receipts. Again, there is that difference. We are both freelance writers. We both work on short-term contracts with ad agencies. Why the difference? I am really very puzzled and am really stressed by my dealings with the BIR. Do enlighten me on this, if you can.
Hi Je de asas. Freelancing is being independent contractor trade or business and not as an employee. As one in trade or business, you are required to register with the BIR as such, issue OR, maintain books of accounts and pay appropriate taxes. There are two different things to note to draw away your confusion – one is voluntary tax compliance, the other is discovery for non-compliance. Other freelance simply do not comply and this non-compliance takes time to get unnoticed by the tax authorities. Just because they do not issue OR and do not pay the tax means that it is really the rules to be followed. It simply means they do not comply.
Hi,
I work at home as a programmer for a US-based company. I am currently categorized by said company as an independent contractor and as such send my monthly payment via bank wire. My income is based off a certain percentage of the company’s monthly net income. Under what category should I fall as a taxpayer and what taxes should I pay (monthly, quarterly, annual).
I was trying to understand the post but it seems that my brain only comprehends the logic of programming and not taxes. 🙂
Thanks in advance.
– Mike
Hi Mike. Let us invite you to our seminar workshop for us to help you with the proper tax compliance of your independent contracting. Just click my name above to reach our site. Thanks.
Hi, its the first time I am here. Nice site. I am from germany and my plan is to move next year to the philippines. I am selfemployed with a own small business (Graphic- and Webdesign) in Germany. Just now I am gathering any informations about taxes and how I can do my business when I am living in the philippines.
In case I can’t keep my business in germany while I am living at the philippines, is it possible to start work as selfemployeed freelanceer in the phillipines (without showing much money on a bank account)? I dont know if there is a difference if I want start as selfemployed freelancer or as a real company with name?
If I do this, then I cant come in the country with a tourist visa?
Is there a income point where you not have to pay taxes or you pay taxes with the first peso you earn?
Do everyone have to pay taxes or some people not need to do?
Sorry for so many questions, but its all new for me in another country.
Hi Sven. Welcome to the Philippines, More Fun in the Philippines. Your capacity to do business relates to the nature and purpose of your presence in the country. If you go for a tourist visa, you could not do business in the Philippines. If your intention to do business in the country is long-term, I suggest you put up a company and using the same, apply for an investor’s visa so you could freely do business.
Income taxes is based on your net income and is applied at the rate of 5-32%. Every person doing business is required to register, pay taxes, and submit reports, otherwise, it will be penalized for not doing so.
We could assist you in your intended Philippine operations. We are a seminar company, and at the same time does visa applications, company registrations, and tax compliance.Thanks.
What is the advantage for me as a individual taxpayer but is also advantage for my future employer in the Philippines? Im an OFW for many years, but one of the company outside our country would like to hire me and work in the Philippines either local employee or consultant under their local partner.
What is advantageos both on my part and the local employer as an employee or consultant? Is the net Income still the same?
Kindly educate me ASAP.
Hi Dan. Let me share my views. As OFW residing outside Philippines, you are classified as non-resident citizen not taxable on income outside the Philippines. If you will be hired for Philippine works, you will now be taxable on your compensation in the Philippines. I suggest, that you go for a Philippine salary net of taxes that is higher to your OFW salary or at least equal.
As consultant, you can deduct 40% optional standard deduction as compared to as an employee so it might be worth considering. However, you will have to register with the government agencies, file returns, pay taxes, issue official receipt, and maintain books of accounts. Please let me know if you will need further assistance. You can contact me through my name above. Thanks.
Hello TaxAcctgCenter.org,
Greetings!
A property owner who I’ve helped sell his huge land is giving me a finder’s fee of 20 Million pesos. I am not a broker. I’m a retired employee. I was just in the right place at the right time.
He will give me a check or a manager’s check or he may just deposit the amount in my account. I think I will just have to sign an acknowledgement receipt.
My question is, how much tax to I need to pay? Are there ways to avoid(not evade) the maximum tax thru allowable tax deductions?
Please bear in mind that I want to honestly pay taxes legally and avoid the rhetoric of investigation and court processes. I’m too old for that.
Thank you.
Good day
Thank you for this information. However, I really don’t know how to start this stuff..
I used to be a freelance talent and I actually registered as professional talent under the mixed income/professionals from 2007 to 2010 and subject to expanded withholding tax. I stopped doing commercial etc when i got married.. Now am going to start in an advertising company as a regular employee. But I still have few gig invitation sometimes.. What should I do? Do I need to change the type of my tax? Would this be automatic? Or should this fall into payroll tax only but not with the expanded withholding tax.. sorry am noob with this stuff ty.. please help me understand ty..
I have a question, I am a CPA and when I passed the CPA exam last 2011 I was being employed in a private company for one year. I worked as an Accounting Officer there..Do I have to pay the said PTR? what are the taxes I should pay other than the w/holding tax deducted on my salary?
I will appreciate your help. Thank you
Hello,
I’m from Europe and I’m about to move to the Philippines and open a small business and I’m concerned about this taxation method.
As far as I understood your explanation it means I will have to pay VAT of the same product sale 3 times?
Monthly, quarterly and yearly? This is called triple taxation and will make the product expensive to final customers.
Can you please clarify this doubt because in Europe VAT over VAT is an illegal taxation and I just want to confirm if I understood it well.
Thank you.
Hi,
Good day!
Could you please advise on my case?
Since June 2010, I was not employed and haven’t filed any form to BIR until this Sept 2012 where I was hired as a consultant (Programmer). My company gives me 2307 form and deducts 2% of my gross income. In this regard, what are the things I need to do to comply on BIR tax rules?
I learned on this site that I have an open case issue. For my 2010 Tax, I have ITR(2306 form) for Jan-May 2010 income from my previous employer. Does open case still applies on this year?
In addition, my company offers a consultant or employee relationship. Tax wise, what position would be best?
Hi! I used to be an Accountant in a bank and just recently resigned for a reason that I need to give attention first to my months-old baby. I have a brother-in-law practicing his profession as a Surveyor,he asked me to handle their business from bookkeeping to paying necessary taxes to the BIR while I’m still not working. For a help to their business, an extra income for me and for a another experience as well to my profession, I’m thinking to take his offer. But since this is new for me, I don’t know what to do and where to start ‘coz I think their freelance bookkeeper might not be willing to impart his knowledge since she’ll be losing 1 job..(lol)! I hope you can help me..thank you and God bless!
hi!
i work for a clinic as an accountant. when our patients pay via credit card, the practice is to issue two ORs; one for the clinic and one for the doctor. when we receive our 2307 from the credit card companies, the basis of withholding is the gross amount charged to the credit card(meaning our revenue and the doctor’s pf). to cut a long story short, we end up having discrepancies between our reported income and the 2307. what’s the best way to go about this?
also in case we’ll be modifying our OR, there’s this portion that says “in payment for.” since we act as a trust fund of the doctor’s pf, what is the best account to use so that it does not raise any red flag to the BIR? what i have on my list are (1) Doctor’s fee to be reimbursed (2) reimbursable fee / expense (3) acknowledgement of pf.
i greatly appreciate your advice on this. thanks very much. believe me, it’s very costly on our side to explain to the BIR that its not all our income!
Hi, your blog is very informative specially to people like me who had a hard time understanding taxes.. I just have a few questions and i hope you could help me…
From 2008-2011 i had my training ( as a resident physician) in a hospital in manila. A 10% witholding tax is being deducted from our monthly salary. And every 15th of April i am filing my Annual ITR. The last ITR i filed was April of 2012 for the taxable year of 2011. I finished my training January of 2012. I was unemployed since then because i was reviewing for the specialty board exam.
First question is : do is still need to file an annual ITR? If yes, what shoudk i place in the form? That i am unemployed and not receiving any compensation for that year?
Now i am Practicing my profession ( as a doctor- radiologist). I started my practice this January of 2013 in our province. My RDO used to be in manila. Is it ok that my RDO is in manila even if i am practicing here in the province? If not, what should i do?
The professional fee that i am receiving is a percentage of what the patient is paying the hospital for a certain procedure ( i.e, xray, ultrasound). So, aside from the monthly withholding tax that is being deducted from my PF and the Annual ITR , is there any other tax that i should be paying?….every january i am also paying for my PTR.
At present, i am practicing only in one hospital….what if the time comes that i may practice in other hospitals and clinics, i am aware that i should combine all my earnings…how do i file it? What forms do i need for all of these?
Thank you…i hope you can help me on this…kindly send the reply to my email add…thank you very much
good day,
i would like to know when is the deadline for the submission of affidavit-declaration of current year’s gross income?
is it file once or twice a year?
i am a company nurse wherein considered as consultant/self-employed and on a retainership contract…
thank you
Hi
Thanks for a very informative content and responses.
Would like to ask my bro’s makulit na query:
Taxpayer: Professional Doctor,Single.formerly employed now have to file ITR on his own(and clueless on tax!) withheld 10% as consultant on clinic and school.non vat.
Income for 2012 does not exceed 1.5M. How should I file for percentage tax?
if ever I paid, Where does my payments for 2551M and 2551Q fall on my annual ITR or Quarterly?is in on 35O(other payments/credits) of 1701 Annual?
Been filing 1701Q but did not file 2551M and 2551Q? what are the remedies?should I still file on april 15th 2551M(is there penalties for late filing) or just 2551Q for the 4thQ?
Super Thanks my Super Savior! ^_^
Hi –
I am employed in and at the same time engage in small business (salon with 3 people only). Am i going to be double tax between employed and engage in business? i am applying for BIR business registration in RDO 24 while my company pay taxes in my behalf at RDO 50. Please advise which is best in terms of paying taxes.
hi,
Im bit confused on how i will register my business at BIR. I had dti certification on business name already.i am rendering shuttle service to several clients but i am just renting/go to subcontractors. What tax im going to pay.
Hi,
I jst dont know what to do, Im a freelancer/agent/IBO and at the same time im processing my requirements for the employment purposes. I jst transferred my RDO to 043 bcoz im processing my freelance OR and the address of my office is there..now my problem is my soon to be regular job is requesting to transfer my RDO to taguig area. is there any conflict having my freelance job and a regular job at the same time then I dont know where to place/what RDO should i go.?.
Hi,
good day!
I am into the final stage to sell a vessel, my mark up commission is 1 Million, how much tax should be deducted to me by the owner?
await for you reply
thanks
Jeff
Hi,
Good day!
I would just like to clarify some matters. My father is an OFW, seaman to be exact. Therefore, he is exempted from income tax and is not required to file the income tax return. However, few months ago, he started earning additional income coming from our house rental business. Percentage tax of 3% is paid monthly related to income derived from rental (since annual income is below 1,919,500 and the monthly rates of the 2 units are below P12,800, while the other (1) unit is for P14,500).
My concern now is, what form should my father file for the annual income tax return? Or is there any need to file since he’s a seaman? How would be the computation for the said income tax?
I would greatly appreciate your response on this!
Thanks.
Hi, I’m John real estate person and a Vat Registered.
Your blog is very helpful bit I am still confuse on how to pay may taxes.
For every incentives and commission I am earning from a sale of property, I always pay 12% CWT to a developer or company. Question is what else do I need to pay in BIR?
As stated in your blog, if a self employed like me earning an Annual Gross Income that will exceed a 1.something Million is already subjected to a Percentage Tax? VAT?
For example: I earned a 100,000 for a month Incentives but will not exceed my Annual Gross Income, how will I compute my payable to BIR? Except for the 12% CWT which is already deducted to my company.
Thanks a lot!
My husband is a Financial Adviser of an insurance/investment company. He is not an employee of the company because his salary is on commission basis. Does he have to file Form 0605? I am not sure how to fill out form 0605, is this for the calendar year December 2015? Is the ATC = MC180 which is for Registration Fee for Vat/Not-Vat Taxpayers? And the Tax Type = RF Registration Fee? and I only need to pay Php 500 on or before January 31, 2015? I hope you will be able to help me on my queries. Thank you.
Hi, I am wondering if BIR Form 2306, which, as I understand it, represents sales to government entities, VATABLE? Do we incur Input VAT in this kind of sale or is it vat exempt?
Hi,
I have a question. I don’t understand how taxes are being paid for a doctor because working in a hospital, the hospital already withholds 15% withholding tax, and then you’re required to pay an extra 30% of income tax, so all in all you pay 45% of tax (double taxation). Can somebody please explain this to me?
Please send me your tax seminar schedules to my email address. Thank you.
Hi, one confused taxpayer here. I am required to pay for the monthly percentage tax using 2551M however, at the end of the quarter, I am required to file using the 1701Q. With this I am quite at a loss as 2551Ms are due on or before the 20th of the month following the taxable month and if we are required to file the 2551 for, say, March on or before the 20th of April, why are we being required to file the 1701Q on or before the 15th of April when we are still finalizing our records for the March operations?
I just graduated from school last nov.2013, i got my first job on a cellphone trading business company on feb.2014 and still on the job upto now. Upon application they did not require me to present a TIN id or no. of some sort.I don’t see a tax deduction of any in my payroll. So speaking am i not paying my taxes? Am i criminally liable for that, because the company didn’t forcifuly required me to get a TIN in the first place.When I apply for a TIN will BIR have me pay a penalty for those months i am employed but not paying taxes? And finally, “IF” I can apply for a TIN w/o having penalized for an offense I am not aware, can I apply as “self-employed” online even if I’m still employed in the private sector? THANKS IN ADVANCE!
3 questions:
1. no employee , kailan pa rin ba mag submit ng 1601C ? wala ng mga employees nag alisan na.
2. kung meron ng bago casual employee/part-time, wala p mga benefits. mag submit na 1601c?
3. kung mag submit,para s Q1 & 2 . ano fill-up s form? Q.1 & 2
Hello.I just wanna ask if job orders or contractual employees from government are required to pay the annual registration form?they are working in the government also.
Hello.
I’m required to file 1601-E but what if I don’t want to withhold anything from my lessor? Does that mean that I have to pay the 5% of my rent myself? Or should I just put “0” on my 1601-E and submit?
I’m really glad that websites like this exists—perfect place to run to when the BIR officers of the day, BIR call center and BIR help desk are no help at all.
Thank you.
Need help!
The situation is Filipina married to a foreigner and wanted to establish business…How to register in BIR and get a Tax ID. number if the business will be put on the trust. The filipina is the trustee? how to process?
hi po.. ask ko lang po.. non vat taxpayers ar required to pay
1. monthly percentage tax
2. quarterly tax
3. annual income tax
what should i do if im not paying the quarterly tax? akala ko po quarterly tax is just an ’installment’ kind of annual income tax..
Hi, I am employed in a construction company and i wanna know what are the taxes the we need to add up in making our proposed budget for a clients: 1. government 2. private company 3. government-labor only 4. private labor only 5. tax -exempt clients
Hi Sir,
My husband is a licensed architect & I registered him as a Non-VAT professional last July 2015. Based on his COR, he needs to pay 2551M, 1701Q, 1701 & 0605. We filed & paid his PT due for July & Aug. For Sept, aside from 2551M, we will be filing for his quarterly income tax. However, we will be choosing 40% OSD, rather than itemized deduction, bec. it’s more convenient for us.
1. I just wonder if an income statement is still needed as attachment to his 1701Q. If yes, does it need to be audited by a CPA practitioner? If not, what shall be the support of his income tax filing?
2. How shall i accomplish his books of accounts? the BIR required us to submit 1 columnar & 1 ledger upon registration.
Thanks!!!