Taxation for the Filipino freelancer
19 March 2012
Do we file or pay for the 4th quarter separately?
Fellow freelancers asked me about this, and my initial response was “Yes, we also file and pay for the 4th quarter.” Then I thought I’d simply strike the 1st, 2nd, and 3rd quarters of BIR Form 1701Q and affix onto them the 4th quarter. This way, I could use the form for computing tax in the last quarter. But after reading the guidelines and instructions (page 6) of the latest BIR Form 1701, I had qualms performing the task which I thought would simplify the process.
Fourth quarter included in the annual income tax return (ITR). So, I called BIR-Marikina (Regional District Office 045) this morning. And I was so happy to hear from BIR-RDO 045 Chief Registration Officer Joey Flores who was very welcoming in answering my queries over the phone. He explained to me that we don’t need to compute, file, and/or pay for the 4th quarter income tax return separately. We only do that for the first three quarters because the 4th quarter is consolidated into the annual ITR with BIR Form 1701.
Numbers 51 and 55 of page 3. Mr. Flores specified that freelancers—classified as professional income earners—do not fill out numbers 51 and 55 (in the latest BIR Form 1701), as these two items pertain to salaried or regular employees. We fill them out if we have mixed income, that is, if we have a regular job other than our freelancing business.
Required attachments. The latest BIR Form 1701 enumerates 15 attachments. Six items more are added to the new form compared with the nine items specified in the old form. To find out which attachment is applicable to your freelancing business, be sure to get the latest BIR Form 1701 from your RDO or download it online.
Preparing one's financial statement. From my conversation with Mr. Flores, I also learned that a freelancer may prepare and sign his own financial statement as attachment to his accomplished Form 1701. This attachment is required among taxpayers whose gross quarterly earnings, sales, and receipts exceed PhP150,000. Refer to page 6 of the latest BIR Form 1701 for details.
Registration requirements. Before concluding my phone conversation with Mr. Flores, I asked if the registration requirements are still the same for professional income earners like the home-based freelancers. I read to him the list their office gave me in 2009: (1) two copies of filled-out BIR Form No. 1901, (2) letter of intent, (3) photocopy of birth certificate, (4) business location sketch, and (5) registration fee of PhP500. To this list, he said, "Yes." The registration list may vary though. For instance, a freelancing business has promoted and established its physical presence (or may puwesto) in the city or elsewhere. Freelancers with this type of business may then be required to secure a mayor’s permit, SEC or DTI, sanitary permit, and NBI clearance, among others.
Ongoing BIR orientation. Mr. Flores is the key person handling the orientation seminars that BIR-Marikina (RDO 045) freely conducts in its office for new income earners and business registrants. The orientation seminar is held on Thursdays at 10:00 a.m., with the seminar registration starting as early as 9:30 a.m. (Old registrants may still drop by and listen.) While a similar orientation is given by all BIR-RDOs, taxation inquiries are welcome at RDO 045. Simply call +63-2-646-5231. You may also read online The Filipino freelancers' guide to paying taxes and securing social benefits for details.