What Online Sellers, Freelancers need to know before paying their tax - Android

The Bureau of Internal Revenue (BIR) has recently announced that it is giving an extension to online sellers, freelancers, and practically anybody else who...

The post What Online Sellers, Freelancers need to know before paying their tax appeared first on YugaTech | Philippines Tech News & Reviews.

The Bureau of Internal Revenue (BIR) has recently announced that it is giving an extension to online sellers, freelancers, and practically anybody else who are earning from digital transactions until July 31, 2020 to register and settle their accounts.

Here are things you need to know before you panic about your online business.

1) You will need to register your business as either sole proprietorship, self-employed professional or a corporation (depending on your situation). For most home-based online businesses, it’s just sole-proprietorship and you can start by registering your business name with the DTI (see here). You then register with the BIR.

2) If your annual sales or professional fees do not exceed Php250,000 a year, you will pay zero (Php0.00) tax. You will still need to file your annual Income Tax Returns (ITR). It’s just that you won’t be paying anything.

3) If you earn more than Php250,000 but not more Php3,000,000 a year in sales or professional fees, you have the option to pay a flat 8% tax from your gross receipts. To compute your payable tax, just deduct your annual gross sales by Php250,000 and apply 8%.

For example, you earn Php600,000 a year from selling cookies and baked goods from home. You subtract Php250,000 from that (Php600,000 – Php250,000 = Php350,000) and then multiply the remainder by 8%. That (Php350,000 x 8%) is the amount you pay to the BIR (Php28,000). This only applies to sole-prop and self-employed professionals where expenses are very minimal.

Another option is to pay the tax based on graduated income tax (0% to 35%). This is better if you have large operating expenses that are deductible from your annual revenue.

If you look at the tax table above, you can see that you will also pay zero (0) tax if you earn less than Php250,000 a year.

So, for example, if you sell cookies and baked goods with an annual sales of Php600,000, you need to add up all your expenses (cost of goods). Let’s say, you spent Php200,000 for raw materials, packaging, marketing and delivery of your cookies, your taxable income is only Php400,000 (Php600k – Php200k). You belong in the bracket #2 which is 20% in excess of Php250,000. That means your income tax is (Php400,000 – Php250,000) x 20% = Php30,000.

You will have to compute your payable tax using these two options before choosing which one to apply for.

4) Remember — even if your sales is below Php250,000 a year and you don’t need to pay any taxes, you still need to register with the BIR and get your receipts printed so you can issue sales invoices to your customers. These invoices will be the bases of your total annual income that will be computed for the tax next year.

The post What Online Sellers, Freelancers need to know before paying their tax appeared first on YugaTech | Philippines Tech News & Reviews.