All You Need to Know About Working as an Independent Contractor in The Philippines

The freelancing market in the Philippines is quite competitive. In fact, it was reported in December 2018 that the Philippines was the country with the 4th largest number of users on Freelancer.com. This level of competition requires you to stand out. You can only distinguish yourself if you really understand the industry, and this is where this guide comes in.

Getting started as an independent contractor / freelancer in The Philippines

Getting started as an independent contractor / freelancer

Freelancers in the Philippines need to register as self-employed individuals in order to begin work. Furthermore, they need the following:

  • A Tax Identification Number (TIN)
  • Department of Trade and Industry (DTI) Certificate

A Tax Identification Number

To obtain a TIN, one must register with the Bureau of Internal Revenue of the Philippine government (BIR). The official website of BIR also makes clear that this application must be filed on or before your business as a freelancer starts. According to the website, the following documentation should be provided to obtain your TIN:

  • BIR Form No. 1901;
  • Any identification issued by an authorized government body (e.g., Birth Certificate, passport, driver’s license, Community Tax Certificate) that shows the name, address and birthdate of the applicant;
  • Registration fee of P500.00 and P30.00 for loose Documentary Stamp Tax (DST) or proof of payment of annual registration fee; and
  • BIR Printed Receipts/Invoices or Final and clear sample of Principal Receipts/ Invoices.

The list above comprises the general requirements; however, for specific cases, you may also be asked for:

  • Department of Trade and Industry Certificate (for sole proprietorships);
  • The Special Power of Attorney (SPA) and ID of authorized person, if there is an authorized representative that will transact with the BIR; and
  • Certificate of Authority, if Barangay Micro Business Enterprises (BMBE) registered entity (if applicable).

Now that you know what you should have, follow the next steps to apply for a TIN. These steps are also outlined on the website of BIR:

  • Submit the BIR Form 1901 and the requirements with the New Business Registrant Counter of the BIR Regional District Office (RDO) which has jurisdiction over your primary place of business or residence. The good news is that your particular RDO will host a meeting for new business registrants about their rights and obligations;
  • Make the payment for the annual registration fee and loose DST. Also pay for the BIR Printed Receipt/Invoice at the New Business Registrant Counter in the BIR Office; and
  • The RDO, as evidence that you paid, will then issue the Certificate of Registration (Form 2303), “Notice to Issue Receipt/Invoice”, Authority to Print, BIR Printed     Receipts/Invoices, and eReceipt.

Currently, actions are being taken to ensure that freelancers in the Philippines start off on the right foot. Philippine News Agency states that the freelancers protection bill was approved by the House Committee on Labour and Employment on January 19th, 2021. This bill stipulates, among other things, that a contract must guide every transaction between a company and a freelancer, and assistance desks or lanes will be reserved for freelancers in all RDOs.

Taxes for independent contractors in the Philippines

We’ve discussed the process of getting a TIN, which is necessary for tax payments. Now, let’s look at things independent contractors need to know about taxes in the Philippines.

  • You are not required to pay taxes if you earn less than P250,000.00 annually;
  • As an independent contractor, you are responsible for your premium contributions to Philippine Health Insurance Corporation (PhilHealth), Social Security System (SSS), and Home Development Mutual Fund (Pag-IBIG Fund);
  • You need the BIR Form 2307 when filing taxes. When a client is paying you, they may give you a BIR Form 2307 to reveal the part of your payment they withheld for tax; and
  • If your annual income is more than P3,000,000.00, you must pay a 12% value added tax based on the amount of gross receipts for the services you rendered. If it is less than that but more than P250,000.00, then you can be subject to one of the two tax rates below, depending on your preference:

1. Income tax rates between 0% and 35% on net taxable income and a 1%percentage tax based on gross receipts starting 1 July 2020 until 30 June 2023(after 30 June 2023, the percentage tax shall be 3%); or

2. 8% on gross receipts in excess of P250,000.00.

How to file an Annual Income Tax Return

  • Fill out 3 copies of the BIR Form 1701 or 1701A for individuals who are mixed-income earners or earning     purely from services as independent contractors, respectively;
  • If payment is necessary, do the following:

1. Visit the closest authorized agent bank (AAB) of your RDO and present the BIR Form 1701 or 1701A (whichever is applicable), other documentation, and payment money. In the absence of an AAB, you can visit the Revenue Collection officer. Ensure that the RDO is the one where you are registered at and which has jurisdiction over you.

2. Then, you will be given a stamped and validated copy of the form; and

  • If payment is not required, the only difference is that you will go to the RDO or any BIR official tax     filing center to show your BIR Form 1701 or 1701A (whichever is applicable) and the other documentation.

Types of Taxes Freelancers Should Pay

  • Quarterly Income Tax

1.    You file the BIR Form 1701Q for this tax;

2.    You can declare deductibles when filing this tax;

3.    This is based on one of the two tax rates already discussed;

4.    It is based on net income; and

5.    The deadline for this tax is the 15th of April, August, and November.

  • Annual income tax

1.    The forms required are the BIR Form 1701 or 1701A (whichever is applicable) and BIR Form 0605;

2.    It is also based on one of the two tax rates discussed previously; and

3.    This tax is paid at the final quarter of the year (i.e., on or before the 15th of April).

  • Quarterly Percentage Tax

1.    The forms you need to file are the BIR Form 2551Q and BIR Form0605;

2.    You pay this tax at any AAB of your RDO and the deadline is within25 days after the end of each taxable quarter; and

3.    This tax comprises 1% of your quarterly gross receipts (if you do not opt for 8% income tax as discussed above).

How to open a bank account in the Philippines

For citizens:

Generally, the documentation below is crucial for setting up a bank account in the Philippines:

  • Two IDs, which could include     passport, driver’s license, voter’s ID, etc.;
  • TIN;
  • ID photos;
  • Bank deposit, to be determined by the particular bank; and
  • Utility bills.

If you are not a citizen, all is not lost. You can still open an account as long as you have been in the country for more than 180 days (around6months). As a general rule, you will need:

  • ACR which is the Alien Certificate of Registration Card. Another option is the Immigrant Certificate of Registration;
  • Proof of address;
  • Initial deposit that the particular bank requires;
  • ID such as a passport; and
  • Passport photos.

Note that the foregoing are only general rules and a specific bank may require additional documents based on its own policy.

Important Reminder

You are acting solely as independent contractor under the relevant client contract and the relationship between you and the client does not constitute relationships of partners, associates, principal and agent, or employer and employee between you and the client.

Therefore, you are not entitled to any benefits under the Philippine Labour laws and rules and regulations and you are solely responsible for the payment of your own taxes and remittance of your social contributions to PhilHealth, SSS, and Pag-IBIG Fund as discussed above.

Conclusion

We’ve outlined some important facts about being an independent contractor in the Philippines. Nevertheless, you should continuously immerse yourself in research about the ever-evolving freelancing industry. Comment below the tips that have helped you navigate being an independent contractor in the Philippines.

Note. This content was generated by RemotePass team and reviewed by a certified tax advisor Kyle D. Irasust a at Arceo and Tandoc in The Philippines

 

 

 

 


Ready to get started?

Sign up for your free demo today!

More from RemotePass

People are talking

Hear what teams love about using RemotePass.

RemotePass has been so efficient for us as we have at least 60% of our team being remote. Especially for tracking if everyone has been paid out or if they have reimbursements, we don't have to manually do it one by one anymore. It's also really good since we are in compliance with each and every single one of our remote teams' place of residence.

Lorena A, HR
@NasDaily

RemotePass has enabled Swvl to be more flexible, allowing us to hire the best talent in Remote locations. RemotePass has been a great partner and fast tracking Swvl's growth plans in multiple countries. Special shout out to the support team for the exemplary service.

Faizan M, Global HR
@SWVL

Brilliant service. We love and we'd be using it for the years to come. Also great customer success management as well!

Badr A.  CEO
@Soum

We love the entire system you guys have built, it's user-friendly and in particular we love the automated notifications part. Employees are automatically informed about the payment status and they receive the payment in a couple of hours after they get notified vs. manually asking us. Thanks for your ongoing support

Muhammed, CFO
@ShortPoint

The experience with Remote pass and the assistance you have provided with my recent transaction is amazing. I really liked the follow-up nudge and provide me details is super cool. Thanks for your help

Tarun V.
@NasEducation

Using RemotePass has been an absolute game-changer for our operations - knowing that we have a reliable partner on our side even in complex regions efficiently (this has previously been a big headache for us), allows our teams to focus exclusively on client service and product delivery

Nina, Associate VP
@Infomineo

We were looking for a simple and affordable product and RemotePass more than delivered. RemotePass helped us streamline and manage our remote teams. RemotePass understood us as a company and provided us the support and confidence that we are compliant with regulations, our remote teams have excellent support, and that we made the right choice

Preeta, HR Business Partner
@Eyewa

Love it! It has been an essential tool for us, the perks of having everything at the point of my fingers.Using RemotePass has been super efficient. The platform is user-friendly and fast, and communication with customer service is truly a "gold standard".

Iyad A, Head of People
@Unico

RemotePass has been very helpful as it streamlines the payment process to our consultants, with a simple 2 to 3 clicks the job is done. It is effortless and straightforward to use. The most important thing is that It eliminates any compliance risks we might face, and the lengthy verification process. Overall the system is excellent, and I would recommend it to other organizations.

Rafik, Head of HR
@Rizek

The product has been incredibly a game-changer for us as we scaled our team globally. Creating a great first impression when onboarding remote teams . Everything centralized in one place. Love it!

Roxana L, Chief People Officer
@Bankio

Our work with RemotePass is a partnership based on trust and credibility we are proud to have. With RemotePass services, onboarding and payroll for our global team is well managed and our employees feel safe and cared for.

Fahad A, HR
@Soum KSA

I was instantly impressed with the UI/UX of the RemotePass platform, it is incredibly user-friendly and the feedback I have received from the remote workers has been excellent. Having supplied contract and remote staff to clients in the Middle East for several years, I have been used to a very manual and labor-heavy process when it comes to payroll and compliance. After one demonstration from the team at RemotePass I switched from using an existing supplier, as I get better value and service using this platform.

David S, Practice Lead
@Salt

Try RemotePass Today!

Join leaders who depend on RemotePass every day to be ahead of the curve.