Filing your income tax return (ITR) is one of the most important responsibilities for anyone earning an income in the Philippines. Whether you’re a freelancer, an online seller, or a small business owner, understanding how to compute and file your taxes properly can save you from penalties and ensure you stay compliant with the Bureau of Internal Revenue (BIR).
This guide breaks down the basics of income tax returns in the Philippines, how to compute them step-by-step, and why hiring experts like Tax Assist PH can make your life so much easier.
What is an Income Tax Return?
An income tax return is a document you file with the BIR to declare your income, deductions, and the amount of tax you’ve paid or still owe for the year. It’s essentially a summary of your financial activity for a specific taxable year, showing whether you’ve paid the right amount of taxes.
For freelancers, online sellers, and small business owners, filing your ITR is required by law and ensures that you’re paying your fair share to support the government’s programs and services.
To understand more about what income tax returns are and who needs to file them, check the official BIR website’s page on income tax returns.
Who Needs to File an Income Tax Return in the Philippines?
Here’s a quick summary of who is required to file an ITR:
Individuals
- Freelancers and self-employed professionals (such as virtual assistants, consultants, and online sellers).
- Mixed-income earners (those earning income from employment and running a business or freelance practice on the side).
- Resident citizens earning from sources within or outside the Philippines.
- Non-resident citizens earning income from sources within the Philippines.
Non-Individuals
- Corporations, including partnerships, domestic and foreign companies, trusts, and estates earning within the Philippines.
Step-by-Step Guide to Computing Your Income Tax
Filing your ITR starts with properly computing your taxes. Here’s a step-by-step guide to help you:
1. Determine Your Gross Income
This is the total income you earned for the taxable year before any deductions. For freelancers and small businesses, this could be payments from clients, revenue from sales, or other sources of income.
2. Decide on Your Deductions
You can choose between two methods:
- Optional Standard Deduction (OSD): Automatically deduct 40% of your gross income, no questions asked.
- Itemized Deductions: Deduct the actual expenses related to your business (e.g., rent, utilities, transportation, supplies).
Choosing the right deduction method can significantly reduce your taxable income.
3. Compute Your Taxable Income
Subtract your deductions from your gross income.
- Taxable income = Gross income – Deductions
4. Apply the Tax Rate
The Philippines uses a progressive tax rate for individuals. Here’s a quick breakdown:
- Up to PHP 250,000: 0% tax
- PHP 250,001 to PHP 400,000: 15%
- PHP 400,001 to PHP 800,000: 20%
- PHP 800,001 to PHP 2,000,000: 25%
- PHP 2,000,001 to PHP 8,000,000: 30%
- Above PHP 8,000,000: 35%
For businesses, the corporate income tax rate is 25% for most companies. Micro and small businesses earning PHP 5 million or less per year can enjoy a reduced rate of 20%. For more on business taxes, check this guide on the Philippines’ tax structure.
5. Include Tax Credits and Payments
If taxes were withheld from your income (such as by a client or employer), or if you made quarterly payments, subtract these from your total tax liability.
6. Determine Tax Due or Refund
Finally, compare your total tax liability to your tax payments and credits:
- If you’ve paid more than you owe, you can claim a refund or carry the excess forward to the next year.
- If you owe more than you’ve paid, you need to settle the balance.
Why Filing Your ITR is Challenging
Let’s face it—computing and filing your ITR can be overwhelming, especially for busy freelancers and small business owners. Here are some common challenges:
- Confusing Tax Rules
Knowing which form to file (e.g., BIR Form 1701 or 1701A) and which deductions you qualify for can feel like solving a puzzle. - Time-Consuming Process
Gathering receipts, calculating taxes, and filling out forms can take hours you don’t have. - Risk of Errors
Mistakes in your computations or late submissions can lead to hefty penalties.
Why Choose Tax Assist PH for Your ITR Needs
At Tax Assist PH, we’re here to take the burden of tax filing off your shoulders. We specialize in helping freelancers, online sellers, and small business owners manage their taxes accurately and efficiently.
Here’s why we’re the right partner for your tax needs:
- Expert Tax Filing
Our team ensures that your ITR is prepared and filed correctly, following BIR guidelines. - Accurate Computations
We double-check every calculation, so you never pay more than you should—or face penalties for underpayment. - Time Savings
Spend less time stressing over taxes and more time running your business or enjoying your hard-earned income. - Compliance Without the Stress
We stay up-to-date with tax laws and BIR policies, ensuring you’re always compliant. - Personalized Service
Whether you’re a freelancer, online seller, or small business owner, we tailor our services to your specific needs.
Let Us Handle Your Taxes
Don’t let the complexities of filing your income tax return hold you back. With Tax Assist PH, you can count on accurate, hassle-free tax filing that saves you time and eliminates the guesswork.
Ready to simplify your tax obligations?
📞 Contact us today at +63 960 296 0376
📧 Email us at taxassistph@gmail.com
🌐 Visit us at www.taxassistph.com
Leave the tax stress to us so you can focus on what really matters—growing your income and your business.
Tax Assist PH: Your Partner in Simplifying Taxes in the Philippines.