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.

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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

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