What is this “withheld” amount? Why did my client not pay the full amount? What is this 2307? Is this the “ITR”? When you get your check from your client and, specially, if this is the first you’re getting paid, you probably have these questions in mind. So let us help you understand how withheld taxes work in the PH context. In this article, we’ll share the updated withholding tax table 2018 specifically for Freelancers and Professionals (not employees).
First things first, I would recommend that you read this article that we previously published:
With that out of the way, let’s get down to brass tax (*groan*) —
The Updated Withholding Tax Table 2018
The BIR recently released Revenue Regulation 11-2018 updating the previous withholding tax table that was followed before. There are some exceptions and considerations that are key so I would still recommend you read it, however, for most of us, the following will apply:
|Payee Type||Gross Income||WHT Rate|
|Individual||Annual Gross income <= ₱3M||Five percent (5%)*|
|Individual||Annual Gross income > ₱3M||Ten percent (10%)|
|Non-individual||Annual Gross income <= ₱720K||Ten percent (10%)**|
|Non-individual||Annual Gross income > ₱720K||Fifteen percent (15%)|
* For individual payees, to avail of the 5% WHT rate, you will have to submit the following not later than Jan 15 of each year or at least prior to the initial payment of your fees:
- Sworn declaration of gross sales/receipts (if you have only one lone payor, use this template instead)
- Copy of your Certificate of Registration
If you were not able to submit the above requirements to your client OR if the payment exceeds P3 Million, then you are automatically subject to the 10% WHT rate as per the above withholding tax table.
** For non-individual payees, to avail of the 10% WHT Rate, you will have to submit the following not later than Jan 15 of each year or at least prior to the initial income payment:
- Notarized sworn statement that your gross income will not exceed P720K
- Copy of your Certificate of Registration
If you were not able to submit the above requirements to your client OR if the payment exceeds P720K, then you are subject to the 15% WHT Rate as per the above withholding tax table.
I’m the one withholding… I want to have some sworn declarations too!
Well, you’re in luck, you masochist!
As per RR No 11-2018: withholding agents shall need to execute a sworn declaration stating the number of payees who have submitted the income payees’ sworn declarations with the accompanying copies of their COR. This needs to be submitted, together with the list of payees, to your RDO on or before January 31 of each year or fifteen (15) days following the month when a new income recipient has submitted the payee’s sworn declaration.
My other client didn’t do this? Why is THIS client withholding?
Although most businesses are required to withhold taxes, not all businesses are. It depends on what’s on their COR (or what the BIR assigned to them when they registered). So it differs based on what’s required by the BIR from the business.
Fine, my client withheld taxes. At least I’m done… I’m done, right?
NO. You still have to file your own tax returns. Let me repeat that: you still have to file your own tax returns. The amount in your 2307s are then deducted from your income tax due.
With Taxumo, you enter your 2307’s (simply copying what’s written) and they are automatically deducted from your income tax dues. Easy peasy.
I see what you did there.
If you want to avail of the lower tax rate, then yes, you do need to make sure that you register your business. To avail of that, you would need to provide a COR to your client and only registered businesses have a COR.
If you don’t register, you’re basically stuck with a 10% tax rate, instead of the much more favorable 8% or the 3% percentage tax + income tax. So if you really want to maximize your earnings, go legit and register now!
Speaking of registration…
Planning on getting registered? Taxumo is piloting a new business registration service. If you’re interested, send us a note. We’ve heard the clamour from our beloved SME/Professional/Freelancer market so there you go. 🙂
Ready to file and pay your taxes online with Taxumo?