What is a Self-Employed Professional?
This refers to a person who earns remuneration by rendering professional services. They are not employees and only receive payment when they provide their services. Some professionals have to pass regulatory boards such as engineers, accountants, doctors, architects, and the like. These people are required to have licenses and a Professional Regulation Commission (PRC) Card.
However, other professions like those who engage in freelancing, writing, blogging, graphics designing, and other creative services are also called professionals though they are not mandated to pass a regulatory board. Do note that in this instance, a professional refers to anyone who is self-employed, licensed or otherwise, and not under pure employment.
Why Should Professionals Do BIR Registration?
According to the Tax Code of the Philippine Section 236(j), any person required under the Internal Revenue Code to make, render, or file an income tax return, financial statements, or other supporting documents must be assigned with a Taxpayer Identification Number (TIN) for proper identification for tax purposes. You are only supplied one number for life. As a professional and law-abiding citizen, you must register as a self-employed to file your tax returns.
Apart from being mandated by the law, here are the benefits of registration:
Your BIR Form 1701A or annual income tax return serves as proof of earnings, which you can use to apply for loans and credit cards
Consider registration to avoid hefty penalties by paying taxes on time. You can be slapped with interest and surcharges by delaying this
Lower cost of government application, certificates, permits, and liceBeing registered means being able to provide official receipts with serial numbers, so your clients will have more confidence in obtaining your services. The majority of big companies will not transact with a freelancer that has no official receipt
Render your work with a clear conscience, knowing you are fully compliant with your tax obligations. Following an ethical and moral standard means you can sleep well at night and imbibe positive karma
Avoid getting charged with tax evasion, which is punishable under law
What are the Documentary Requirements?
The requirements for registration of professionals include these documents:
• Birth Certificate or any official government-issued document showing your name, address, and birth date (if ID has no address, bring proof of business address)
• Valid Professional Regulation Commission (PRC) ID card (if applicable to your profession)
• Payment of Professional Tax Receipt (PTR) from the local government (if applicable to your business)
• BIR printed Receipts/Invoices OR final and clear sample of OWN Receipts/Invoices
What are the Steps for Registration?
Here are the simple steps to help you register with the BIR:
Step 1: Secure your own Tax Identification Number (TIN) via the BIR website (www.bir.gov.ph) if you don’t have one yet. If you already do, you can skip this step.
Step 2: Go to the nearest RDO (Revenue District Office) near your business address.
Step 3: Accomplish BIR Form 1901, known as Application for Registration For Professionals, Mixed Income Individuals, Estates, and Trusts.
Step 4: For those who have TIN number but want to change their business, you must fill out BIR Form 1905. This same form is needed in case you lose your original TIN.
Step 5: Submit these forms with supplementary, identifying documents to the RDO officer for evaluation.
Step 6: Secure and fill out BIR Form 0605, known as the Payment Form. You can have this validated in any authorized bank by the RDO when you pay your P500 annual registration fee.
Step 7: Don’t forget to pay the P15 Certification Fee and the P15 Documentary Stamp Tax (DST). In turn, they will furnish you a form which you must attach to your registration certificate later.
Step 8: Wait for the notice of release of your BIR Certificate of Registration (COR), also known as BIR Form No. 2303, along with your “Ask for a Receipt Notice” (ARN). Your COR must include the returns that must be filed plus with the taxes to be paid.
Step 9: Register your book of accounts or ledgers and have these stamped by the RDO.
Do note that registration is not the final step. You need to constantly deal with you taxes. As such, you must maintain a book of accounts using a cash basis or accrual accounting method. Be mindful of keeping your ledgers and invoices for ten years in case of an audit.
For professionals, whose income exceed P3,000,000, you need to have your book of accounts audited by a Certified Public Accountant. Your annual returns must all come with your certified balance sheets, profit and loss statements, and other supporting documents.
Navigating the complex Tax Code of the Philippines is quite overwhelming. To prevent any mistakes, it would be best to seek the advice of a Certified Public Accountant.
