The Freelance Pinoy

Expert Advice for Freelancers

Guide #1: 5 Good Reasons Why Pinoy Freelancers Should Pay Taxes

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Taxation has always been a mystery among Filipino freelancers, yet it’s a necessary step if you want to be considered as a legitimate freelancing business.

While there is a significant lack of clear tax laws applicable to freelancers and online workers, it is still a freelancer’s responsibility to learn about tax laws applicable to his or her situation and to abide by these laws at all times when operating one’s freelancing business.

When I made the decision to register myself as a tax payer, I did receive a handful of negative reactions from members of my family. With the BIR running after the family business and monitoring its income reports, the fact that I can earn without needing to register myself as a tax payer is a dream come true for them.

But I knew that there is still some good in paying taxes, so I did a bit of research to see what resources were out there regarding taxes and freelancing in the Philippines.

You can have a look at these articles:

As you can see, it’s an issue that’s already been discussed, debated, and argued upon. The fact of the matter is that according to Philippine tax laws, we must pay our taxes if we are located physically within the Philippines and regardless whether the sources of income are coming from within or outside of the Philippines.

Quoting again from PinoyMoneyTalk.com’s article:

A Filipino citizen is taxed based on his taxable income derived within and without the Philippines, which includes part-time works as an offshore, outsourced writer for a US-based website (see page 157 Annex A1 of Philippine Taxation Handbook: A Simplified Course September 2006 Edition).

Again, no matter where the source of income is coming from, it is still taxable by law. If you received your funds from an online MLM scheme, an outsourced project, work from a fellow professional, etc., it is still taxable income.

5 Reasons Why Freelancers Should Pay Taxes

Convinced, I sought the help of a certified public accountant to talk about the process further and to help me with my own taxes. We discussed many things regarding taxation, especially the benefits and consequences of paying and evading taxes.

Here are 5 good reasons why Pinoy freelancers should pay taxes:

  • You need to think long-term. Buying a house or a car is a lifetime investment that securing a loan to buy one will mean presenting actual proof that you have the earning capacity to pay for it. Unless you plan on buying your next Honda Civic or Toyota Lexus in cold cash, you need to show your income tax returns to the company or organization.
  • You are required by Philippine law to pay taxes. Not paying means breaking the law, and if you get caught breaking the law, you will be penalized heavily by the BIR without question. That’s 25% to 50% of your income per year plus up to 20% interest. Read Section 232 of the National Internal Revenue Code.
  • You’re in control of your taxes. Registering as a tax-paying self-employed professional gives you the opportunity to declare your taxable income without the BIR dictating how much you have to declare every year. According to an article by About.me Tax Guide William Perez, “Being self-employed is quite possibly one of the best tax strategies available today…you are in full control of your tax situation, and you can reduce current income by any losses you have from freelancing, renting out property, or investing.“
  • You save yourself from a lot of inconvenience. You may think that you can live without a credit card or a particular service, but as your business grows and your ideas encourage you to go forth and be risky, you will need other payment methods besides cash. Applying for a credit card, a phone line, an internet connection, etc. will definitely be easy if you have ITRs, SSS, and other income-related documents on hand.
  • You’re doing your part as a citizen of the Philippines. It’s certainly difficult knowing that your taxes are pocketed by greedy people in the government, but at least you did your part as a citizen of this country. Even though you have the opportunity to evade and live life tax-free, it’s always good to know that you lived up to your responsibility by diligently calculating and paying your taxes.

>> GUIDE #2: BIR REQUIREMENTS AND REGISTRATION <<

oDesk Local Funds Transfer: My Own Personal Experience

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odesk-local-funds-transfer

In a nutshell, Local Funds Transfer allows you to withdraw your oDesk earnings directly to your bank account, saving you from using more expensive payment methods like PayPal or Payoneer.

Adding the Local Funds Transfer payment method is definitely easy.  All you gotta do is use your bank’s BRSTN code (these codes are PayPal’s bank codes), your exact bank account name, account number, address, and country.  Since we’re Pinoys working on oDesk, we’re to use the Philippine LFT payment method.

But I do encourage you to double or triple check your bank information before clicking on the yellow button to continue.  Many delays and transfer errors usually sprout from a misspelling or missing number, so avoid making mistakes when entering your bank info, particularly your bank account name and bank account number.

The Actual Withdrawal

This is just a sample screenshot. Don't mind the amounts shown.

With enough money ready for transfer, I visited the Withdrawals section of my Financial Activity and began the process on March 15, a Tuesday.  Since this is my first time using LFT, the $1.99 fee is waived and the transaction free.

I selected Local Funds Transfer as my withdrawal method, clicked on Available Balance to withdraw the entire amount, and reviewed the amount that I was going to receive in 3-5 business days.  Once everything is correct, I said a little prayer for good luck and clicked Withdraw.

Note: Below the exchange rate a small reminder that the exchange rate to be implemented for your withdrawal will be the rate on the next business day.  So even if the exchange rate says 42.50 or higher, expect the rate used to be tomorrow’s exchange rate.

The Final Result

Here’s where the good part comes in: the result of the Local Funds Transfer.  What do I think of it? Absolutely easy and hassle-free!

I had 4,000 pesos in this account prior to the withdrawal, BTW.

I withdrew my money Tuesday, March 15 an hour or two before noon.  I then received it today, March 18, after checking my account around 11:04 AM.

So that’s 3 days for the transfer, which is more or less close to how fast PayPal would send my earnings to my bank account.  And since I use a BPI Express savings account, there was no deduction for remittance unlike that nasty P150 fee from PayPal withdrawals.

As for the exchange rate, it was more or less 43.00746 to $1 which is actually pretty good.  I’d normally get an exchange rate of about 42.30 if I had withdrawn from PayPal, which was really low for me.  Pinoy freelancers on oDesk won’t have to worry about how high the rates are so long as it doesn’t plummet on the next business day after making the transfer.

My LFT Conclusion

I really was nervous about using Local Funds Transfer for my withdrawals, but after this first successful transfer I can finally breathe easy whenever I need to use it to withdraw to my bank account. It’s cheaper, hassle-free, and extremely easy to use that many Pinoy freelancers won’t have to put all of their eggs in one basket anymore (ahem!).

To recap, here are a couple of reminders and tips to make your Local Funds transfers smooth and easy:

  • Make sure your bank account name, bank account number, BRSTN or bank code, address, and country is 100% correct.
  • To lessen the $1.99 pain, withdraw when you have a big amount of money credited to your oDesk account. 3-4 figures should be okay.
  • The exchange rate used is always the rate of the next business day after making the withdrawal.
  • Withdraw either Monday or Tuesday to receive your money in at least 3 days.  Expect longer if there are US holidays in between days.
  • Use a BPI Express savings/ATM account if you want to receive your money in full. It’s only P500 to open, plus bank has agreed to waive their remittance fees for transfers from oDesk.
  • Be patient and don’t worry too much. If you have any questions or concerns, just contact oDesk customer support for help.

>> BACK TO TABLE OF CONTENTS <<

Complete Your First Two Elance Provider Account Verifications

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In my previous Elance post, I’ve talked about the different profile sections that you need to complete before starting on your Elance journey to success.

Today, I’m going to talk about the next step to profile/account completion, which is completing your first two verifications as an Elance provider.
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