Becoming a self-employed Filipino professional is an exciting journey, but it also comes with responsibilities, particularly regarding taxation.
Read along as we go through the steps, requirements, and tax obligations you need to fulfill to operate legally and confidently as a freelancer or independent professional in the Philippines.
Understanding Self-Employment and BIR Registration
The Bureau of Internal Revenue (BIR) classifies self-employed individuals as those who generate income from their own business or profession without being employed by a company.
This includes freelancers, independent contractors, and professionals like lawyers, doctors, and accountants who work independently.
Registering with the BIR is not just a legal obligation—it legitimizes your work, allows you to issue official receipts, and helps you build trust with clients.
Benefits of BIR Registration
Legitimacy:
Registering with the BIR provides you with a Certificate of Registration (COR), which is proof that your business is recognized by the government.
This certification allows you to issue official receipts and invoices, a requirement for many clients, especially large corporations.
Improved Client Trust:
Having the ability to issue official receipts can enhance your credibility and professionalism, making it easier to secure high-value contracts and long-term clients.
Access to Loans and Credit:
Your annual income tax return (BIR Form 1701A) serves as documented proof of your earnings, which can be important when applying for loans or credit cards.
Tax Compliance:
Registering with the BIR helps you stay on top of your tax obligations, paying the right amount of taxes and avoiding penalties or legal issues.
Peace of Mind:
Knowing that you are compliant with tax regulations allows you to focus on growing your business without the worry of unexpected tax issues.
Steps to Register as a Self-Employed Professional
- Secure Your Tax Identification Number (TIN)
If you do not already have a TIN, you will need to apply for one.
You can do this online through the BIR’s official website or by visiting your nearest Revenue District Office (RDO).
If you already have a TIN from previous employment, make sure it is updated to reflect your self-employed status.
- Gather Required Documents
Before heading to the BIR, prepare the following documents:
- Valid ID:
Provide the original and photocopy of a government-issued ID, such as a driver’s license or passport. - Birth Certificate:
Submit the original and photocopy of your NSO birth certificate. - Proof of Address:
A utility bill or other official document showing your current address. - Professional Regulation Commission (PRC) ID:
If applicable, bring your PRC ID. - Professional Tax Receipt (PTR) or Occupational Tax Receipt (OTR):
Obtain your PTR or OTR from your local city or municipal hall, depending on your profession. - Barangay Clearance:
Secure a clearance from your barangay to prove residency. - Sample Receipts/Invoices:
Bring samples of your receipts or invoices for verification.
- Visit Your Revenue District Office (RDO)
Go to the RDO that covers your business address.
At the RDO, you will need to complete BIR Form 1901, which is the application for registration for professionals, mixed-income individuals, estates, and trusts.
- Submit Documents and Pay Fees
Submit all the required documents along with the completed forms to the RDO officer.
You will need to pay an annual registration fee of P500 using BIR Form 0605 at an authorized bank.
Additionally, you will pay a certification fee of P15 and a documentary stamp tax of P15.
- Attend the Taxpayer Briefing
Before you can receive your Certificate of Registration (COR), you must attend a taxpayer briefing conducted by the RDO.
This briefing will educate you on your tax obligations and filing requirements.
- Claim Your Certificate of Registration (COR)
Once your application is processed, you will receive a notice to claim your COR (BIR Form 2303) and an “Ask for a Receipt” notice (ARN).
Your COR will list the types of tax returns you need to file and the taxes you are required to pay.
- Register Your Books of Accounts
Purchase and register your books of accounts, including a journal, ledger, subsidiary professional income book, and subsidiary purchases/expenses book, at the RDO.
These books are here for maintaining accurate records of your income and expenses.
- Apply for Authority to Print Receipts/Invoices
Complete BIR Form 1906 to apply for the authority to print official receipts and invoices.
You can either go to an accredited printing press or submit the form directly to the RDO, depending on the procedure.
- Print and Stamp Receipts/Invoices
Once your Authority to Print (ATP) is approved, you can have your official receipts or invoices printed by an accredited printer.
Remember to have these booklets stamped by the RDO to finalize the process.
Post-Registration Obligations
Display Your COR and ARN:
Once you have registered, you must display your COR and ARN in your place of business, if applicable.
Maintain Books of Accounts:
Keep detailed and accurate records of your income and expenses.
If your quarterly revenue exceeds P150,000, your books will need to be audited by a certified public accountant.
Issue Receipts/Invoices:
You are required to issue an official receipt or invoice for every payment you receive.
This is necessary for maintaining transparency and complying with tax laws.
File and Pay Taxes:
File your income tax returns and pay your taxes on time, even if your business has not yet started generating income.
Renew Your Registration Annually:
To avoid penalties, renew your business registration and pay your annual registration fee every year.
Additional Considerations
SSS, PhilHealth, and HDMF Registration:
If your business earns more than P1,000, you are required to register with the Social Security System (SSS), Philippine Health Insurance Corporation (PhilHealth), and Home Development Mutual Fund (HDMF) as a self-employed individual.
Employee Registration:
If you employ others, register them with SSS, PhilHealth, HDMF, and the BIR, if they do not already have a TIN.
Tax Filing Services:
Consider using a tax filing service like Taxumo to simplify your tax filing process and help you stay compliant.
Frequently Asked Questions
- Are there any specific deadlines or timeframes for completing the registration process?
While there’s no strict deadline, it’s best to register as soon as possible to avoid penalties and maintain legal operation. The process usually takes a few days to a week, depending on the efficiency of the RDO and the completeness of your documents.
- What are the tax implications for self-employed individuals in the Philippines, and are there any special deductions available?
Self-employed individuals are required to file and pay income tax based on their annual earnings. They are also subject to other taxes like value-added tax (VAT) and percentage tax. Special deductions are available for business expenses, such as rent, utilities, supplies, and professional fees.
- Can you provide more details about the BIR certificate of registration (COR) and its benefits for travel?
The BIR Certificate of Registration (COR) is a document issued by the BIR that confirms your registration as a self-employed professional. It serves as proof of your legal business operation. While it’s not a direct visa requirement, having a COR can be beneficial for visa applications, especially for digital nomads, as it demonstrates your income source and legitimacy.
Video: BIR Registration for Freelancer, Self-Employed and Individual Contractor
This video guide walks freelancers and self-employed professionals through the process of registering with the Bureau of Internal Revenue (BIR).
You’ll find clear, step-by-step instructions on how to update your BIR registration if needed, gather the required documents, and submit your application at the BIR office.
It covers what to expect when you visit the BIR, including how to present your documents, pay the necessary fees, register your books of accounts, and get your Authority to Print official receipts.
Conclusion
Registering as a self-employed professional with the BIR is a step for any freelancer or independent worker in the Philippines.
It legitimizes your business, builds trust with clients, and keeps you compliant with tax laws.
By following the steps outlined in this guide, you can smoothly navigate the registration process and focus on growing your business.
Stay informed, maintain your records diligently, and seek professional advice if needed to help you succeed as a self-employed professional.