Best Tax Tips for Freelancers in the Philippines

How should Freelancers handle their taxes? Some freelancers don't seem to find any importance about filing their taxes. Most of them forget the need to record incomes, expenses and tax deadlines. This is because most freelancers don't find this as an important responsibility. According to Salve Duplito a Resident Financial Advisor "Unpaid taxes and unfiled documents are like vipers hiding on your closets. They are easy to ignore, until its too late, and they decide to strike."

As a freelancer , it is important to record every earning specially if you or your small business earn big. The sooner a freelancer set their tax filing system straight, the more worry free their life is going to be.

A freelancer is required to:

1. prepare monthly returns

2. Meet monthly and quarterly schedules of tax payments

3. Submit reports and audit financial statements

4. Keep books of accounts

5. Issue Receipts

An earner that makes more than P 1.9 million is vat-able in an amount of 12% VAT. While and earner that earn less the P1.9 million a year should pay 3% percentage tax. For those people whose business provides services, percentage tax is more practical. Keep in mind that this is considered separate from personal income tax payments.

When Income tax is filed, there are two choices to compute allowed deductions:

1. Optional Standard Deduction of 40% of income.

2 Itemized deduction, which has no limit

Experts still prefer to use the OSD-Optional Standard Deduction since it is hassle free, simplifies record keeping and removes the necessity to defend a specific deduction/expense to the BIR. Other experts also says that it is fairly impossible to exceed paying more that 40% limit. 

In the other hand, other experts recommend Itemized Deduction to reduce the amount of tax that needs to be paid tremendously. In this computation, a tax payer may deduct anything at a very reasonable and realistic cost as long as theirs a receipt or proof of payment clearly indicates the necessity of the expense to the business. Careful and proper classification of deductions are very important in this computation since it could lead to disallowed deduction if its not properly organized. BIR follows only 1% of gross as a threshold for the allowable deduction amount. 

In a business, being able to issue receipts and claim that your a business person that pays taxes is considered a measure of competence and professionalism. For someone who is not fully aware of tax declaration may also hire a competent accountant that can be trusted or someone who can teach the right way to do your taxes.

Read more »

Credit discrimination to BPO employees in the Philippines

Banks used to love those people working in BPO companies since BPO employees earn alot and spend alot but that seems to be changing. A viewer from ANC: On the money episode have shared his experience from an anonymous financial institution, this is how the letter go.

Dear Salve:

I was walking in the mall 7 months ago with a friend when someone approached us offering freebies for a credit card. I found myself applying for one and answering their questions but when they asked for my ID and learned that I worked in BPO, they said "mukhang malabo sir kasi sa BPO kayo nagtatrabaho." I asked what was wrong with BPOs and they said that agents don't normally pay. Although I told them that i work in the HR Department, they said they would check and call me, but they never did, Isn't this credit discrimination?

Lawrence

Note: Lawrence worked at Telus Inc. and already had a credit card at that time and worked as an IT recruiter in HR Dept. for Canadian Canadian Account

Around the year 2000 when BPO companies were starting to boom. BPO call center agents were young, earning serious money and very big spenders. The spending patterns was mostly patterned of their high stressed job. But these people are also most often the people who quickly change employers since BPO companies offer attractive sign-on bonuses to high performing agents which makes it easy for them to get a new post.

Sources in the banking industry said, this system is turning off financial institutions since going after someone who immediately transfer to different companies is very difficult to catch. This issue has been so serious that Banks decided not to offer credit cards to any BPO Workers.

Other than this, there's also a talk going around that banks are automatically rejecting applications from lawyers and politicians.

It is understandable that the bank has to protect the quality of their portfolio which includes staying away from individuals who are not capable to pay however Salve Duplito said,

"There should be a mechanism to protect consumers from credit discrimination so that access to credit is not based on some underwriter's subjective decisions, or in this case, the general failure of an industry  to make good on their obligations."

Salve Duplito/Residential Financial Advisor

According to Pia Roman- Tayag, BSP Head for Financial Inclusion Advocacy, one part of their solution regarding this issue is to improve access to financial information about the financial institutions' clients.

Two things that can help this effort:

1. Success of the Credit Information Corp. in setting up a credit database

2. New Technology that use data analytics so that banks can use big data to "score the unscoreable"

Pia added that our country needs this as only 10.5% of adults have access to formal credit. Pia is talking about the World Bank's Financial Inclusion Data where surprisingly only 3% of our population ages 15 and up have access to credit card. In addition, only 27% of adults have an account at a formal financial institution which means our banks financial tools are not useful as it is supposed to be. According to Salve, financial empowerment begins with being able to use the tools that the financial institution can offer. Clearly, this is not going to improve, especially if consumers are subject to credit discrimination. 

In United States, there is a law that protects individuals from credit discrimination like the Equal Credit Opportunity Act and the Fair Housing Act, both of this law protect the american consumers from being refused credit if they qualify for it as it is illegal to base credit decision on 

• race or color
• religion
• national origin
• Gender or marital status
• receipt of public assistance 

This US Laws apply not only for credit cards but to any other forms of credit such as Loans, line of credit or Mortgage. This US Laws are not in existence here in the Philippines, which means we need to support the creation of an integrated credit database. Other than this, as an individual we should protect our credit history by paying off our obligations and lastly by building our own personal credit resume. We hope that one day, our government could come up with the solutions to protect us consumers against financial institutions that practice credit discrimination.

Acknowledgement: 

Content credit: Salve Duplito/ ANC

Image credit: Arkansasrealtors.com

Read more »

SSS Launched Provident Fund

Not everyone has been fully aware of the Provident fund that was launched by SSS. Provident fund will allow members to enjoy higher returns on their contributions. The tax refund is opened for employed and self- employed Filipinos here and overseas.Provident fund gives additional layer of protection to contributors.

Provident Fund Contributors Requirement:

• Available to members under 55 years of age
• Member must be paying maximum SSS Contributions of P1,560/month
• Maximum contribution for the fund is P100,000/year

According to Ms. Marissu Bugante, VP for Public Affairs of SSS, this provident fund will assure contributors of higher benefits in the future as this individual accounts will generate dividends depending on the amount of the contribution.

Provident Fund Benefits:

• Retirement fund and total disability fund (65%)
• Medical (25%)
• General Purpose Payments (10%)

Funds withdrawn for purpose of medical and general purpose payments before the 5-year  retention period will be subject to penalties and charges. This provident fund will be a good choice for contributors who are earning more as this will give them a good savings options at their own benefit. 

The main advantage of provident fund is the retiring contributor will have an option to withdraw the the fund in a lump sum or monthly pension. Other than this, SSS guarantees earnings based on 5-years treasury bond rate while the remaining 35% will be guaranteed to earn at 364-day treasury bill rate.

At the moment, SSS have 35,000 OFW members who registered in the program and are earning incentive bonuses for the last two years, The maximum amount that was earned by one of the flexi-fund member last year was over P130,000 not adding up the additional P60,000 earnings that was received this year. 

The fund launched today will be available around February of next year, This will be used for investment in government and private sectors and loans for members. 

The Provident Fund makes investing easier for filipinos while providing them with benefits. For those who relies in retirement,provident fund should be considered specially for those who do not have additional savings and investments.

Acknowledgement: 

Content Credit: SSS and ANC/ Melissa Gecolea

Image Credit: www.philstar.com

Read more »

Bank hacking incident in the Philippines

Some banks and even retail stores in US have been attacked by hackers.Now, lets see what bank hacking means and how we can avoid it from happening.

• Bank Hacking is more profitable than kidnapping or robbery
• Appears victim-less because of the lack of violence (but serious financially)
• Involves fewer people and resources
• Generates more money and targets more people

According to Drexx Lagui,Digital Forensic Expert, the easiest thing to do is to go after the bank account holders themselves or the individual persons like the branch managers because they have the authority and their names are published in the internet.

In  a recent case, hackers targeted a branch manager. Locally the security breach was caught as were the perpetrators. The hackers broke in the computer and transferred money to a Las Pinas branch, due to the security features of the bank they were able to find out that the money was fraudulently transferred as there were indications of hacking attacks.

Tips to Spot Hacking:

• Watch out for suspicious e-mails.
• Be careful of the sites being visited
• Hackers profile based on the sites visited
• Hackers send e-mails appealing to the targeted victims interests and weaknesses

Tips Against Hacking:

• Call your own bank to double check email from them
• Call the police to confirm if they have emailed you 
• Do not immediately click on any link nor reply unless you have verified 

Banks are not obligated to give your money back if your account was hacked through your actions. Most bank will replace the money as an act of goodwill but still depends on the bank's discretion if they will replace the money that was stolen. 

According to Drexx hackers have impressive credentials as well. Russia and China have the most successful hackers. Other than this, we also have to watch, as per Drexx there are rumors that even our politicians are involved in hacking for the incoming 2016 election. 

Bank continue to upgrade their security system but account holders still have to remain vigilant against these hackers as we do not know when they might attack.

Acknowledgement: 

Content Credit: ANC/Salve Duplito

Image Credit: www.ehackingnews.com

Read more »

Will the 50-20-30 budget approach will work for Filipinos?

Budgeting could be easier with the expert called 50-20-30 approach. 50% goes to fixed costs, 20% to savings and investment goals and 30% to fund budget. But is this approach good or bad? 

This is a great approach for those who don't know how to begin budgeting or are too clueless on how to control their spending and save a bit of money. Lets all admit that this is almost 90% of the people around us, budgeting is a very common conundrum. If you are in the situation, you have probably tried tracking your budget to the envelops system or an excel worksheet, use quicken or an app. Its not about all of these things but either forget to begin or fail to sustain them. Simplify the process by using the 50-20-30 approach. Limit your spending for three categories:

• 50%  of total-take home pay should be put in for essential cost, this should include mortgage, school service for children or parking garage fees at work. 
• 20% should be put in financial goals such as college education fund, retirement or health fund.
• 30% is for the lifestyle expenses such as clothes and other lifestyle activities

By creating only a three categories, this approach break the mental barrier for most people averse to tracking their finances. That is the biggest benefit for this budget approach. But, remember that the success in this strategy does not depend on tracking after spending the amount. Its success hinges on creating a limit and then sticking within that limit. 

This budgeting requires a bit of thinking and having a clear idea what your essential spending categories are and a list of financial goals that you want to achieve. 

Weakness:

The weakness of this budgeting approach lies on a simplified simplicity. Even if a person is earning more than the average amount every month. How easy is it to keep essential spending below 50%?

For most people half of that will probably go to mortgage, food and considering which category should include monthly savings for annual expenses like tuition, travel or car maintenance. 

Lastly, is 20% too much or too little for financial goal? Some might find that a 10% amount is better for beginners, some may find to reach their financial goals they may have to push to 30% or even higher. 

The 50-20-30 approach is a good soundbyte but if followed strictly then it might lead you astray. 

If somebody earns P30,000 a month, Using this approach, only P15,000 (50%)  should be allotted of rent, transportation, food and electricity. Set aside P6,000 (20%) for financial goals and then P9,000 (30 %) for lifestyle expenses. In both low income groups and high income brackets, this budget approach is not going to work. 

"To make budgeting work, you have to create your own and adapt it to your own situation." 

                                                                                                                        Salve Duplito.

In saving money, it would not matter to start saving at least P50 per day and increase it to P100 per day in 6 months or 1 year. The amount at this point is not as important as to creating a habit since it is difficult to save money. To connect this to budgeting, skimming from the top would be very helpful by setting aside saving immediately after receiving the salary and make do with what remains without having to borrow. But, lets keep in mind not to get stuck into that level,that is by increasing it little by little by taking 10% of total take home pay or even higher. To make this savings habit easy to do, focus on setting aside savings and investment funds first then make do with the rest without having to borrow. In some months, essential expenses may go higher than 50% of total monthly earnings and some months it is lower than 50%. But it will not matter if you treat savings and investments like a monthly electricity bill, whats important is the savings and investment goals. 

Other people say that 20% savings and investment monthly is doable. This is by keeping our spending simple and by motivating ourselves and not think about retirement rather for future spending like travel, cruises and and happiness at 60 years of age and that could give some motivation. 

When a person hit 30s, around 40% of income should be set aside already for investment. By 40s, affords a 40% and go up higher than 40% but then again this is a very general rule.

Like any financial rule of tongue, this 50-20-30 strategy can lead you astray, it may be a good starting point but remember to use it only if it fits your own financial goal. 

Acknowledgment:
Content Credit: ANC/Salve Duplito
Image Credit: savingissexy.info

Read more »

Telcos blame inadequate infrastructure for slow internet in the Philippines

"Infrastructure limitation should mean one of the big disturbance in providing faster internet service to more Filipinos" a message from the two major telecommunications companies invited to a senate hearing on the issue in September 16, tuesday. PLDT Director Rey Espinosa said some P746 billion of capital outlay would be need to provide a minimum of 2 mbps internet speed for households all over the country. 

"We have to take it into account how much that will cost in terms of investment, 

while we might want to strive a minimum of 2 mbps for 80% of the household. The amount of the capital expenditure is just too high for the country and we are saying if we were to provide a minimum of 2 mbps to all regardless of social class, there is also a question of affordability." Rey Espinosa - PLDT Director

Telcos also insisted that there is no way to guarantee to get a minimum of 2 mpbs for internet speed for mobile devices since this would depend on the demand in particular area. 

"For example you are going along Edsa and there is an accident and you clogged-up, 

then the natural tendency to have the usage pattern to increase thereby creating a temporary hotspot."

- Manny Estrada/Globe Telecommunications Co.

Both Globe and PLDT say they see 100% 3G coverage throughout the country by the end of 2014. According to National Telecommunications Commission, 3G connection is currently at 60%. Senator Bam Aquino, Chairman of the Senate Committee for Trade Commerce and Entrepreneurship, believes that government should already step-in and spend to improve telecommunications infrastructure. He also -- on the big gap between the minimum and the maximum connection speed advertised by internet service providers or ISPs. Senator Aquino says, this is advantageous to consumers since their service expectations may not be me.

The NTC also explains it is currently unable to regulate internet service rate because internet is defined as a value added service by law. The commission though can regulate the quality of the service given the proper equipment. The NTC is eyeing the purchase of a P14 million machine to monitor internet speed in metro manila. 

Ultimately, Sen. Aquino believes that improving internet service is a matter of national importance since it has a direct effect on the growth of the economy and the creation of jobs. 

"I will have to admit, this could not happen if we experience good internet service,this is the time when 

the government should step-in authority." - Sen. Bam Aquino

Aside from improvement in infrastructure, other proposals discussed in the committee hearing including encouraging more competition in the ISP Industry and exploring systems that will make internet traffic more efficient in the country. 

Acknowledgement:
Content Credit:  ANC/Atom Araullo
Image Credit: Mabzicle.com

Read more »

BIR strikes market investors

BIR Commissioner Kim Henares pushing to implement to ruling requiring companies to list all the list of investment receiving dividends or coupon payments.This ruling may be affecting corporate bond sales which explode since the ruling in January. Companies have sold $4.7 billion bonds here in the Philippines and trailing the $17.8 billion in Malaysia and $12.5 billion in Thailand this year.

Revenue Regulation 01-14 requires all withholding agents to submit an "alphalist" of payees on income payments to creditable and final withholding taxes and prohibit the lumping into a single amount and account of various income payments and taxes withheld.

The Philippine Stocks Exchange together with the Bankers Association of the Philippines and several other business groups are petitioning the Supreme Court to declare the ruling unconstitutional. They were successful in getting a temporary restraining order.The Supreme Court ordered the BIR, SCC and Department of Finance to comment on the petition.

Petitioners argue that the regulations jeopardize the privacy of individual investors and market stability, they add complying with the regulation would violate data privacy act. The current script was or are electronic system is settled by the Philippine Central Depository or PCD. The system ensures the efficient transfer of shares and protects investors from unauthorized third parties since it disallows access to information beyond the PCD nominee.

Petitioners said complying with the regulation meant violating the data privacy act while non-compliance mean sanction by the SCC. Both have criminal penalties on them. In a letter to the BIR and Department of Finance earlier this year the petitioners claim that RR01-14 increases cost of doing business specially for non-resident portfolio investors will have to hire accredited tax lawyers to process their tin applications.

In an interview with Bloomberg Kim Henares, the BIR Commissioner said "Why complain if they had reported it when they should have. They should be paying taxes on it." She said that it makes her think that the right taxes haven't been paid by investors and issuers. For now, the case is still in court. As the business community waits to see what's next. 

Acknowledgement: 
Content Credit: ANC/Melissa Gecolea
Image Credit: tomtax.blogspot.com

Read more »