In Part 1, we explored the harsh realities freelancers face when they fail to comply with Philippine tax laws — from hefty fines to potential imprisonment and even the closure of your business. Now, let’s dive into the next crucial step: how to file income tax returns in the Philippines correctly and efficiently.
Whether you’re a seasoned freelancer or just starting out, knowing the right way to file your taxes is key to safeguarding your career and financial future. Let’s break it down.
Who Needs to File an Income Tax Return in the Philippines?
Not sure if you’re required to file an income tax return? Let’s clear that up.
For freelancers — who are classified as self-employed individuals — filing an ITR isn’t optional; it’s a legal requirement. Here’s a breakdown of who must file:
✅ Resident Citizens: Filipinos earning income from local or international clients.
✅ Non-Resident Citizens: Filipinos working abroad but earning income from Philippine sources.
✅ Resident Aliens: Foreigners living and working in the Philippines, earning local income.
✅ Non-Resident Aliens Engaged in Trade or Business: Foreigners outside the Philippines but earning from local sources.
But what if you’re a part-time freelancer with a full-time job? If you earn additional freelance income alongside your salary, you still need to file an ITR — even if your employer has already deducted taxes.
Who’s Exempt?
Employees whose taxes have been correctly withheld by their employer and who have no other income (commonly called “substituted filing”) are exempt from filing a separate ITR. However, this doesn’t apply to freelancers.
When to File Income Tax Returns in the Philippines
Knowing the deadlines is just as important as knowing how to file. Missing them leads to penalties — and trust us, the BIR doesn’t take late filings lightly.
For freelancers and self-employed individuals:
📅 Annual Income Tax Return (BIR Form 1701) — Due April 15 of the following year (e.g., income from 2024 must be filed by April 15, 2025).
For freelancers earning above ₱3,000,000 (VAT-registered):
📅 Quarterly Income Tax Returns — Due on the 15th day after each quarter ends (e.g., April 15, August 15, and November 15).
Missing these deadlines can result in surcharges, interest, and penalties — which snowball fast.
Step-by-Step Guide to Filing Your Income Tax Return in the Philippines
Ready to file? Here’s a clear, actionable guide to ensure you do it right:
1. Determine the Correct Tax Form
Freelancers typically use:
- BIR Form 1701 — For self-employed individuals, professionals, and those with mixed income.
- BIR Form 1701A — For freelancers who opted for the 8% flat income tax rate.
Using the wrong form may result in errors — and potential penalties.
2. Gather Your Documents
Ensure you have:
📌 BIR Form 2316 — If you have employer income alongside freelance work.
📌 Invoices and receipts — To report income and deductible expenses.
📌 Financial statements — If applicable (especially for higher-earning freelancers).
3. Calculate Your Taxable Income
Start with your gross income (all your earnings). Subtract:
✅ Optional Standard Deduction (OSD) — 40% of gross income (no need to itemize expenses).
✅ Itemized deductions — If you prefer to list your actual business expenses.
Compare this with the 8% flat rate option — freelancers earning below ₱3,000,000 can choose this simplified approach.
4. Fill Out the Tax Form
Input your earnings, deductions, and tax due. Double-check everything to avoid mistakes that could trigger an audit.
5. File Your Income Tax Return
Choose from these filing methods:
- Manual Filing — Submit forms and documents directly to your BIR Revenue District Office (RDO).
- eFPS (Electronic Filing and Payment System) — Ideal for VAT-registered freelancers or those required by the BIR to file online.
- eBIRForms — A downloadable, user-friendly tool for filling out forms and submitting them online.
6. Pay Your Taxes
After filing, pay the tax due through:
💰 Authorized agent banks (partner banks of your RDO).
💰 Gcash, Maya, or other mobile wallets (linked to the BIR system).
💰 Online banking portals — For added convenience.
What Happens if You File Late or Don’t File at All?
Think filing late is no big deal? The BIR disagrees.
Here’s what you could face:
25% surcharge on top of unpaid taxes for late filing or payment.
20% annual interest (compounded) on your unpaid balance.
Compromise penalties — Extra fines depending on the violation’s severity.
For repeat offenders or intentional tax evasion, penalties escalate fast — with fines up to ₱10 million and imprisonment of 6 to 10 years.
Pro Tips for Hassle-Free Tax Filing
✅ Track income and expenses — Keep a spreadsheet or use accounting software to stay organized.
✅ Don’t wait until April — Start preparing your documents early to avoid last-minute mistakes.
✅ Consult a tax professional — If you’re unsure about deductions, forms, or tax rates, it’s worth getting expert help.
Final Thoughts: Stay Compliant and Focus on Growth
Filing your income tax return in the Philippines isn’t just a legal requirement — it’s essential for protecting your freelance career and unlocking growth opportunities.
Skipping taxes might seem tempting, but the risks — from heavy penalties to losing your business — simply aren’t worth it.
Need help navigating the tax maze? Tax Assist PH has your back. We’ll handle everything — from registration to filing — so you can focus on what you do best: growing your freelance business.
📧 taxassistph@gmail.com
🌐 www.taxassistph.com
Stay legit. Stay secure. Stay successful.