Why Filing Taxes is Important in the Philippines — And What You Need to Know
Taxes are a fundamental part of any functioning society, and the Philippines is no exception. Whether you’re an employee, freelancer, business owner, or corporation, filing taxes is both a legal obligation and a civic duty. But beyond compliance, paying the right taxes contributes to the country’s development and opens up key benefits for individuals and businesses alike.
In this article, we’ll dive into why filing taxes is important in the Philippines and explore the types of taxes commonly filed.
Why Is Filing Taxes Important?
When hiring, the classification of your worker isn’t just a label—it has significant legal, financial, and managerial implications. Here’s a deeper look at how employees and independent contractors differ:
- It’s the Law
Under the National Internal Revenue Code, all individuals and businesses earning income in the Philippines are required to file taxes. Non-compliance can lead to penalties, audits, or even legal action.
- Helps Build the Nation
Taxes fund public services like infrastructure, education, healthcare, and security. Filing and paying taxes directly support government programs that benefit society.
- Supports Business Legitimacy
For businesses, regularly filed taxes are proof of legitimacy and professionalism. They’re often required when applying for loans, government contracts, or business permits.
- Access to Loans & Financial ServicesBanks and financial institutions require Income Tax Returns (ITRs) or BIR Form 2316 when evaluating creditworthiness. Filing taxes improves your chances of approval for personal or business loans.
- Avoids Penalties & Interest
Late or incorrect filings can result in hefty surcharges, interest, and compromise penalties. Staying on top of deadlines protects your finances and your peace of mind.
Common Types of Taxes Filed in the Philippines
The Bureau of Internal Revenue (BIR) administers several types of taxes, depending on your income source and type of taxpayer.
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Income Tax
- Who files it? Employees, freelancers, self-employed individuals, and corporations.
- When? Annually (on or before April 15) and quarterly for businesses.
- Forms Used:
- BIR Form 1700 (Employees)
- BIR Form 1701/1701A (Self-employed)
- BIR Form 1702 (Corporations)
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Percentage Tax (Non-VAT Registered Businesses)
- Applies to businesses earning ₱3 million or below annually that are not VAT-registered.
- Form Used: BIR Form 2551Q
- Filed: Quarterly
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Value-Added Tax (VAT)
- Required for businesses earning above ₱3 million per year.
- Form Used: BIR Form 2550M (Monthly), 2550Q (Quarterly)
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Withholding Tax
- Employers and businesses must withhold a portion of payments to employees, suppliers, or contractors.
- Forms Used:
- BIR Form 1601C (Compensation)
- BIR Form 0619E/1601EQ (Expanded Withholding Tax)
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Annual Registration Fee
- Every registered business must pay a ₱500 annual registration fee using BIR Form 0605.
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Excise Tax
- Applies to specific goods like alcohol, tobacco, fuel, and automobiles.
Who Needs to File Taxes?
- Employees earning beyond the minimum wage.
- Freelancers and self-employed professionals.
- Micro, small, and large businesses, regardless of profit status.
- Online sellers, content creators, and influencers are also required to register and file taxes.
Tools for Easier Filing
The BIR has made tax compliance more accessible with digital platforms like eBIRForms, Online Registration and Update System (ORUS), and Electronic Filing and Payment System (eFPS).
If you’re not sure where to begin, many accounting firms and tax consultants offer affordable filing services—especially during tax season.
Final Thoughts
Need help registering or filing your taxes in the Philippines? Let us guide you through the process.
Message us today to learn more about our tax filing assistance services