#AskTheTaxWhiz: Are online freelancers required to register with BIR?

I am an online freelancer. Am I required to register with the Bureau of Internal Reveue (BIR) even if I am barely making profit? How do I know if I am subject to 12% value-added tax (VAT)?

Yes. Online freelancing, like any business, must be registered with the BIR.

Regardless of the financial outcome, any transaction made more than once to generate income is considered in the course of trade or business.

Except for those classified as marginal income earners, online freelancers are subject to both income and business taxes (i.e. 12% VAT or 3% percentage tax).  

Marginal income earners are individuals with no compensation income but generate gross sales or receipts not exceeding P100,000 ($2,310.31*) annually. These mainly refer to sari-sari stores, small carinderias or turo-turo, drivers/operators of a single unit tricycle. These exclude licensed professionals, consultants, artists, sales agents, and brokers.

If your gross sales or receipts for the past 12 months exceeded P1,919,500.00 ($44,348.57), you are subject to 12% VAT.  Otherwise, you are liable to pay 3% percentage tax based on your monthly sales.

Got a question about taxes? #AskTheTaxWhiz! Tweet @rapplerdotcom or email us at business@rappler.com.  – Rappler.com

Mon Abrea is a former BIR examiner and an advocate of genuine tax reform. He serves as chief strategy officer of the country’s first social enterprise, the Abrea Consulting Group, which offers strategic finance and tax advisory services to businesses and professionals. Mon’s tax handbook, “Got a Question About Taxes? Ask the Tax Whiz!” is now available in all bookstores nationwide. Follow Mon on Twitter: @askthetaxwhiz or visit his group’s Facebook page. You may also email him at consult@acg.ph.

Freelancer photo from shutterstock