Should Filipino freelancers pay income tax?
Without divulging my age, let’s just say I was once a patron of prepaid internet ISP cards during the dark ages where people back then would have freaked out if someone had showed them the IPhone. Anyone remember anticipating that fax sound to end so we could finally start surfing, only to have your sibling pick up the phone extension in the other room? Oh that was so annoying…
But technology and the internet has come a long way. It has even disrupted the very employment landscape and allowed Filipinos to compete for virtually any job in the world, right at the comfort of home. Graphic design, bookkeeping, virtual assistants – the list is endless, and out of this technological revolution an ever growing community of online freelancers has emerged. Some describe online freelancing to be a bit similar to working abroad, only this time you get to do it even in pajamas.
It therefore is not surprising for some online freelancers to think they enjoy the same “tax exempt” status as OFWs, and if not, why not? Why not us too?
OFWs duly registered and compliant with POEA rules do enjoy tax exemption from their overseas employment income. I’m not quite certain why, but my educated guess is this was to compensate for their sacrifices in having to leave their loved ones and for the dollar remittances that have helped propel our economy. Or it could be this concept of residency, meaning it’s not fair to be paying income tax when you’re not physically here to benefit from it. Unfortunately, the location of someone’s customers is generally NOT a basis for income tax exemption. Online freelancers are, from a tax perspective, similar to exporters of handicrafts and garments (only in our case it’s exporting a service). While it’s true companies in ecozones and certain BPOs enjoy exemptions or temporary exemptions (income tax “holiday”), as do some cooperatives, exporters in general are NOT exempt from the income tax.
Yes…online freelancers too have to pay the income tax. But hopefully the thought of not having to go through EDSA everyday will put that big smile back on.