Updated: 27 May 2014
Sat, Sep 24, 2011 at 12:12 AM
I've been looking for a tax guide for Filipino freelancers and let me tell you how happy I am finding your site and seeing the exact information I need. I have been freelancing from 2008 and able to file my ITR until 2010, but this year it seems BIR regulations have changed and I haven't been able to file one. Suddenly, the local BIR has asked me to certify myself as a professional with the branch that has issued my TIN. I would really like to comply with the regulations, so I have been reading about them, but found no information on your site (or I might have missed it) that could answer my question: How would a freelancer issue an OR to a foreign client, and is it legal to disclose this transaction to BIR, as I think business registrations limit the conduct of business to local or national only?
Hoping for your response.
Mon, Sep 26, 2011 at 3:21 PM
Maraming salamat sa iyong email. I'm glad to know that you've found the site helpful. If I may ask, were you able to register as a freelancer? If you need more information about the registration process, you may find the registration requirements via this link, Taxpayer's guide. Now, let's go over your questions.
How would a freelancer issue an OR to a foreign client?[And] is it legal to disclose this transaction to BIR, as I think business registrations limit the conduct of business to local or national only?
I can answer these questions based on my freelance experience. I issue an overseas client the same official receipt I issue a local client. I write on the OR the exact amount of the payment I receive from the overseas client. Then I multiply the full amount (in foreign currency) to the day's conversion rate to get the amount's monetary equivalent in Philippine peso. (If a money transfer site doesn't have a currency converter, I then refer to the exchange rates of the Bangko Sentral ng Pilipinas website.) That amount will be recorded in my cash receipt book and stated on BIR Form 2551M (percentage tax). Later, that amount will be part of my quarterly and annual income tax reports as well. Some clients don't need the OR. But as an integral part of my business policy, I fill out an OR for every payment I receive from clients. This documentation is then reflected on both the accounting books and the BIR tax forms.
I see nothing illegal about accepting work from abroad (if that's what you mean). Can we stop opportunities from coming? And so, if someone from the European region, for instance, has chosen your professional services, then that's well and good. That's an added income for you and our inland revenue. However, as professional income earners, we are expected to declare our source of income to the BIR so that we are taxed accordingly. The issue here is that as freelancers, we remain to be transparent about our income sources, and that we willingly take the responsibility to pay the correct amount of taxes involved in our freelance business.
Manolito, thank you for your questions. I hope that I have answered them sufficiently. Just write back for other questions you may have.
Previously, I'd send ORs to clients via postal mail. I was a philatelist in my younger years that's why I quite enjoy affixing postage stamps on letter envelopes. So I was shocked when at one time the post office staff run my mails though a metered stamp machine. Lesson learned: Say, "I'd like to purchase postage stamps, please (Pabili nga po ng selyo)."
I'll still do that especially when clients would prefer conventional mailing done instead. Recently, however, I've simply scanned the filled out ORs and send them as email attachments to clients. (5-27-14)