As you may know, Philippine Taxes have become relatively equitable these past months. With the TRAIN law amendments, income tax rates are lower now compared to the onerous percentages from the past decades.
People who earn 250,000 PHP annually are now tax-exempt. (They were previously taxed 25%!). To add, a freelancer can now opt to be levied 8% on gross income instead of using the graduated tax rates.
Not only did the Income Tax Rates decrease, now you can pay your taxes online! No more long commutes to the bank, with 2-hour lines just to pay your taxes. If you can settle your taxes conveniently at home, why not? After all, nothing can be certain, except death and taxes, right?
A lot of people are willing to pay their Income Taxes, but the prior rules make it hard for them to pay easily. This progress is precedent for ease of filing that hopefully will increase BIR collection. You can check this link to help you file your income taxes.
Percentage Tax Now Payable Quarterly
Furthermore, Percentage Taxes are now to be filed QUARTERLY starting the 1st Quarter 2018. This is in line with Tax Advisory 01372 announced by the BIR last February 8, 2018.
We are now required to file the Percentage Taxes 25 DAYS after the quarter ended. Previously, we are to file the percentage taxes monthly. Moreover, we now file with form 2551Q instead of 2551M way back.
With the former rule, this was troublesome for taxpayers because it’s time-consuming. Have you experienced Manila traffic? Try it and you will know what I mean.
And for us location independent freelancers, going back and forth just for the percentage tax is definitely a hassle. We need to settle are duties on our home Revenue District Office (RDO) monthly before we can go back to our digital nomad lives.
The switch to quarterly payments gives again another convenience for the willing taxpayer.
Enough Time to Compare
Remember, for every quarter, you are to file:
Graduated Income Tax:
Quarterly Percentage Tax (2551Q)
Quarterly Income Tax (1701Q)
8% on Gross Income:
Quarterly Income Tax (1701Q)
It is important to note that when you opt for the 8% Tax on Gross Income, you don’t need to pay the 3% percentage taxes.
With this ruling, you have enough time to compare if you will have more favorable tax savings from the 8% scheme versus the graduated income tax rates. Check the Total Income Tax payment for either scheme.
Choose which one will benefit you more.
Paying your taxes has now become easier. I hope we all do our part for our nation-building. And it all starts with our taxes. Good Day!
Disclaimer: This article is not by any means a substitute for an expert opinion. This only serves as a general guideline for the readers. It is best to consult with an accountant for your taxes. Also, subsequent rulings of the BIR might hold the content completely obsolete. Please be guided accordingly.