How to Calculate Self-Employed Income Tax in the Philippines

Calculating income tax for self-employed online freelancers in the Philippines involves several steps. Here’s a general overview of the process:

1. Determine your annual gross income: Add up all the income you earned from your freelance work throughout the year. This includes payments from clients, commissions, and any other sources of income.
2. Subtract allowable deductions: Certain expenses can be deducted from your gross income to arrive at your taxable income. These deductions may include business-related expenses, professional fees, and allowable itemized deductions. Keep accurate records of your expenses to support your deductions.
3. Compute the taxable income: Subtract the total allowable deductions from your annual gross income. The resulting amount is your taxable income.
4. Determine the applicable tax rate: The Philippines has a progressive income tax system with different tax rates based on income brackets. As of September 2021, the following tax rates apply for individuals:
   • Annual taxable income not exceeding PHP 250,000: 0%Over PHP 250,000 but not over PHP 400,000: 20% of the excess over PHP 250,000Over PHP 400,000 but not over PHP 800,000: PHP 30,000 + 25% of the excess over PHP 400,000Over PHP 800,000 but not over PHP 2,000,000: PHP 130,000 + 30% of the excess over PHP 800,000Over PHP 2,000,000 but not over PHP 8,000,000: PHP 490,000 + 32% of the excess over PHP 2,000,000Over PHP 8,000,000: PHP 2,410,000 + 35% of the excess over PHP 8,000,000
   Note: These rates are subject to change, so it’s important to verify the current rates with the Bureau of Internal Revenue (BIR) or consult a tax professional.
5. Calculate the income tax: Apply the appropriate tax rate to your taxable income based on the brackets. This will give you the amount of income tax you owe for the year.
6. Consider other taxes and contributions: Apart from income tax, there may be other taxes or contributions you need to fulfill, such as the annual registration fee for self-employed individuals (Form 0605) and the value-added tax (VAT) for those whose gross sales or receipts exceed a certain threshold. Make sure to comply with all the relevant tax obligations.
7. File your tax return: Complete the necessary tax forms, such as BIR Form 1701 for self-employed individuals, and submit them to the BIR within the prescribed deadlines. Pay any tax due or arrange for installment payments if applicable.

Here is a calculator for self-employed income tax:

It’s crucial to note that tax regulations and rates may change over time, so it’s advisable to consult the latest guidelines from the Bureau of Internal Revenue (BIR) or seek assistance from a tax professional to ensure accurate compliance with the current tax laws in the Philippines.