Consolidating Pag-IBIG contributions

On Mon, Dec 17, 2012 at 12:26 PM

Hi Al,

Thinking of joining the freelance way of life early 2013 but still have a couple of questions before I take the plunge. You mind if I run them by you?

1. Any idea of how to consolidate the PAG-IBIG contributions under my name? Worked in Makati twice then transferred to Quezon City, but all I know is that the companies I worked for file those on my behalf. Any suggestions?

2. I understand that I have to go to the BIR and file a 1901 before I start my business. Aside from the P500 registration fee and/or renewal fee annually, what fees am I in for? VAT? Withholding tax? I don't understand and might be in over my head.

Hope you can help.

Thanks!

Mara

On Tue, Dec 18, 2012 at 3:51 PM

Hi Mara, thank you for your message.

Thinking of joining the freelance way of life early 2013 but still have a couple of questions before I take the plunge. You mind if I run them by you?

That's good news you got there! Freelancing is definitely unlike the regular day job where we have work, plus the regular pay. In freelancing, we may always have work, but . . . we may have to wait for the pay. ;)

I assume that you're still a regular employee, so that means your situation may be different from what I know. I would like to suggest then that you visit the Pag-IBIG office and ask the personnel for the appropriate action to take. But once you're already able to present BIR documents showing you're a self-employed or professional income earner, then you may update your employment status, from regular employee to self-employed or voluntary member. You may visit my earlier post on how to reactivate or continue Pag-IBIG contributions or visit the Pag-IBIG website for details and other updates.

New freelancers are classified under non-VAT. But of course, one may opt to be VAT-registered if his annual income is P500,000 and up. Withholding tax is required among employers. Unless you're an individual doing everything without workers, then you're not entitled to pay withholding tax.

Let's categorize our fees and taxes in three areas: BIR, local government unit (LGU), and social benefits. There may be others like your utility bills, but that must be a given for income earners. :D

BIR

Professional taxpayers such as freelancers have three types of fees/taxes to pay as per BIR Form No 2303, also known as the taxpayer's BIR Certificate of Registration or COR: (1) registration fee, (2) annual income tax, and (3) percentage tax (3% of monthly gross sales). Not stated in the COR is the "quarterly tax" which we're also required to pay or simply file at the BIR-RDO (for months without income).

LGU

Then we have community tax (0.1% of the gross annual income) which we file and pay every January of the following year.

Social benefits

Others choose to skip these, but since you're asking me about the fees to pay, I encourage you not to skip these three: SSS, Pag-IBIG, and PhilHealth. Continue your contributions to these three as much as possible.

You may read more about them from The Filipino freelancers' guide to paying taxes and securing social benefits.

Well, I hope this short note helps. Just write back for other questions you may have and I'll do my best to respond shortly. I wish you a blessed week ahead!

Sincerely,