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. Im a licensed professional under non-vat. do i have to file 2551Q every quarter or should i submit the same form 2551M? Kindy enlighten me on this . Thanks!
Hi Vic,
Thank you for putting up this very informative site. It is serving as a guide for us. I am currently an employee and have put up a small printing business. I have started operation mid-October this year and will be filing my initial taxes this month. I just want to clarify two things:
1. Do I still have to file a Quarterly Income Tax and Annual Income Tax separately from my employer if I am not getting any compensation from my start up business?
2. I have one person assisting me at my shop, his salary is below minimum and he doesn’t have papers yet. Should I still file 1601-C?
Hello,
I resigned from my corporate job as an Engineer last August 2015 ‘coz I hav eto take care of my new born baby myself. (So, I have been taxed and I have a TIN ) Then, an opportunity came and I became a US-based Virtual Assistant. And my client does not taxed me. Should I pay taxes? What are the forms required? My Tax contribution ceased when I stopped working and now do I need to resume paying taxes ?
Hi Sir,
I opened an apartment for rent recently . What are the taxes I need to pay?
Thank you!
Hi i am an ofw for more than 10 years and as an ofw i dont have to pay tax and now iam currently living here in the philippines for 3 years now i was bout to apply visa to tour in korea and one of the requirement is ITR i applied a small sari sari store to BIR . just to have an ITR ..but i dont have any idea what to do for me to have an itr to show to the korean embassy ..could you please give me an idea what to do.. being an ofw most of my life i dont have any idea about ITR.. hope you could help me..
I created a web app to make this calculation for an Online Self-Employed individual and would like to know your thoughts
Hi, my doctor friend is a Vat registered taxpayer because she used to have an income of over 2M for the past so and so years. Last year however, her income is less than the vat bracket since she got sick and was advised to take it easy on private practice. Is it possible for her to be a non-vat taxpayer now since her income doesnt exceed the 1.9 M bracket anymore? Thanks, i hope you can help.
Hi there! I registered a small trading business way back in 2003 as Single Proprietor using my personal TIN– ( I had completed the registrations from DTI, Mayors Permit and BIR and subsequently issued BIR Receipts as well) however we failed to start and commence business due to some personal reasons from 2003 onwards. Recently I applied for local employment and was hired but when I was about to update my registrations information (BIR Form 1905) and BIR Form 2305 the new RDO of my new employer DENIED my request and referred me to my old RDO (where I used to register my business 13 years ago!) The old RDO said they cannot process my request without paying all the Registration Fees (RF) from 2004 up to present including all late penalties and compromise thereof; the assessment of fees is more or less 22,000 pesos! I had no idea back then that I have to formally closed the business since there was no business operations all these years. Is there something I can do to seek amnesty or any condonation or absolution of fees? Please help! I am old and wants to get employed again. I would appreciate hearing from you. Thanks you!
Hi i just want to ask which among the two documents would be the basis of the trade income that she will be reporting at the bir for her 2551M. Is it from the OR that my friend issued at the clinic where she is a radiologist (she is not an employee of the clinic) or from the 2307 that the clinic is giving to her? The clinic is always delayed in paying her prof fee and giving her form 2307. My concern also is for the year ending dec 2016. My friend rendered the service last dec but she will be receiving the money only this january 2017. So how will she report the dec income when her OR will be dated jan 2017. Is this professional income part of year 2016 or part already of 2017? As of today the clinic has not issued 2307 yet. And definitely the clinic will state in the 2307 that the prof fee is for the month of dec when my friend rendered her service.
Hi, Good Afternoon!
My husband was retrenched from employment Sept of 2015. In 2016, he worked for 2 sources of income: 1) as an UBER partner driving his own car and receiving payout from UBER on top of 20% UBER fee for all his weekly trips. He registered a trade name with DTI for his Uber income as this is required by UBER for CPC accreditation. 2) Trade partner of his former company wherein he is selling the inventory of the said company for a commission based on sales.
He is now planning to file his income tax return for 2016 but we don’t know how to compute for his taxes given the following scenarios:
1. Per BIR he is still registered as an employed taxpayer. He still needs to register as self employed. Is he required to pay for taxes of his 2016 income even given he is not yet registered as self employed?
2.He is not able to pay monthly and quarterly percentage taxes since he started earning as self employed. If he still needs to pay the percentage tax, do we need to break his income per month or can we just limped all of it as part of December earnings to lessen penalties.
3.No OR was issued for all of his gross receipts for sales commissions. In computing for his gross income, can we just provide estimates?
3. No tax is withheld from him for both sources of income.
Appreciate your help.
Thanks a lot!
Hi, I started a small store selling food items to people in the neighbourhood. The store doesn’t make much money after expenses, do I still need to fill tax forms, by law? The income is only 1-200 p a day after expenses. Thank you in advance
hi im a nurse and work as a reliever in a certain company. i do not have regular schedule of work, i only work once or twice a week, sometimes none.. or if my service is required by the regular company nurses..
the HR deducts 10% of my total earning as professional fee.. is this reasonable?
hi … i have 2 business .. catering and boutique… single proprietor, registered separately. do i need to file two 2551M … I am having a hard time filling for the second one… computer asking me if it is an amended one… thanks hope you can give me advice regarding this matter
Good day Sir,
My kuya is working as a sales representative and would like to ask po what is Contingency Tax? His present company deducted 12% tax and 10% contingency tax from his commission. and their accounting is not explaining the Contingency Tax means. Need your help Sir pls kindly explain po. Thank you very much
Liz
Hello I don’t know where they get the term Contingency tax. However, commission paid to sales representative may be subjected to withholding tax on expanded 1601-E/2307, which is 10%. Maybe that’s the 10%. Anyway, to make sure your brother can claim as deductions to his income tax payable any amount withheld thru 1601E by his company, he should ask for BIR FORM 2307 (Certificate of Creditable Tax Withheld At Source). That form is your proof that your company has withheld your brother’s income and remitted properly to the BIR.