Taxpayer's guide

Updated: June 2015

16 December 2009

Taxpayer's guide2

    According to Section 23 of the National Internal Revenue Code of the Philippines, "A citizen of the Philippines residing therein is taxable on all income derived from sources within and without the Philippines."

    Thus, all Philippine-based freelancers and home-based service providers, who may receive payments from around the world, are mandated by law to register their freelance business with the BIR--under the professional taxpayers category. The requirements for this taxpayer type include the (a) registration of freelance business, (b) BIR-stamped books of accounts, (c) issuance of official receipts, (d) renewal of freelance business registration.

    Now note I've mentioned freelance business because freelance work is indeed a type of business.

A. Registration (Section 236, NIRC*)

    Requirements for registering a freelance business:
  1. Two copies of filled-out BIR Form No. 1901 Application for Registration (or electronically fill out this form using the Excel file)
  2. Letter of intent (You may use this sample free of charge, as template for writing your own letter of intent. Access or the ability to edit documents posted on this site via Google Docs are exclusive to the administrator of this website. Public requests to access said documents are thus automatically denied. To be able to use the letter of intent template on Google docs, just click on the File tab, click on Download, and then click on dropdown menu the Microsoft Word file docx.)
  3. Birth certificate (photocopy)
  4. Business location sketch (this can be your home office)
  5. Registration fee of Php500, along with two payment forms:
NOTE : The BIR may have varying lists of requirements depending on other factors: (a) civil status, (b) legal dependents, (c) type of product or service provided, (d) professional qualification, which may require licensure from the Professional Regulation Commission, or (e) requirements related to being a PRC-licensed professional, among others.

In that case, you may have to prepare/present copies of your marriage certificate, birth certificates of your legal dependents (i.e., children), or other documents coming from local government offices (particularly for self-employed professionals engaged in manufacturing or production of goods).

Take heart! You might already have two or three items from the given list. You'll soon complete the requirements--one at a time. 

B. Books of accounts (Section 232, NIRC)

    For a new freelance business. Books must be registered before their use, before the commencement of the business, or upon registration of the business. The registration/update (i.e., stamping) of books is free of charge. 

    For a renewing freelance business. New books to be used during the succeeding year must be registered (stamped by the BIR personnel) on or before December 31 of the current year. Buying new books and registering them will not be necessary though, unless the old registered books have been consumed. Old books may be used within three consecutive years, from the date of stamping.

    If you need new accounting books to be stamped, remember to bring the following when you visit your BIR-RDO: 
  1. Photocopy of BIR Certificate of Registration (COR)
  2. CMS clearance from the BIR Collection Section
  3. Attach CMS clearance to BIR Form No. 1905 (Fill out: Part I--Items 1, 2, and 3; Part II--Place an X mark on "Update of Books of Accounts"; then proceed to Item 4 I and sign Item 5.) You may also electronically fill out the form by using the Excel file.
  4. BIR Payment Form 0605 with the attached revenue official receipt of the registration fee paid the current year
  5. Previous account books used (see list of typical account books below)
    Typical accounts books of freelancers. We only have five to think about--thank God! :) They are as follows:
  1. Journal 
  2. Cash disbursements
  3. Cash receipts
  4. Ledger
  5. New Official appointment book (you may purchase another accounting journal for this purpose) together with an affidavit of notarized service/product fees, per BIR Revenue Regulations 4-2014
    To give you an idea on how to fill out these books, you may refer to the sample entries of accounting books for the Filipino freelancer.

   You may choose the stylish books for the same purpose, or you may purchase the inexpensive ones like the Best Buys of National Bookstore. You may definitely request a certified public accountant to accomplish these books for you. But if for some reasons, you are restrained to hire a CPA, then consider this good news:  You may fill out your own accounting books based on what you know, as I was also told by a BIR officer of the day. 

    I learned to fill out my books approximately three days. I have included the above link to sample entries, just in case you need templates or samples for your bookkeeping. You may also add or remove headings based on your day-to-day business transactions. The number of columns (i.e., for the cash disbursement book) will largely depend on the number and type of transactions you make. The important thing is that these records remain truthful whichever angle the BIR people will look at them. Do request for the assistance of the BIR officer of the day for details or clarification.  

C. Issuance of official receipts (Section 237, NIRC)

    BIR has constantly urged us to "ASK FOR OFFICIAL RECEIPT" from business establishments and individual service providers who receive payments for products or services worth Php25 and up. Professional freelancers are also expected to issue official receipts to their clients. While some clients don't need an OR, the freelancer should at least fill out one each time payment has been received. This entry will then be reflected in the cash receipts book.

    Official receipts are not the ones bought from any bookstore. These receipts have serial numbers that appear with the service provider's tax identification number registered at the BIR. For reference, I only paid the printer Php650 for the first ten OR booklets, which I believe I would consume within two to five years. 

    But as per Revenue Regulations No. 18-2012, I had to order another set of revised ORs and paid the printer about Php1,500. For practical reasons, I would recommend you choose the OR booklets with carbonized paper already (around Php2,500 per 10 booklets).

    In the process of registering your business, you may request a BIR-accredited printer to assist you in securing from the BIR an authority to print your OR booklets (as per Section 238, NIRC).

D. Freelance business renewal

    As of this year, 2012, a freelancer can renew his BIR registration by simply visiting his BIR-RDO (if the BIR has not yet set up a payment acceptance booth at the municipal office), presenting his filled-out BIR Payment Form 0605 (three copies), and paying for the PhP500 registration fee to the BIR personnel in charge of accepting payments. He will be issued the revenue official receipt and his copy of payment form. 


*National Internal Revenue Code

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