Guide to Filing Income Tax Returns in the Philippines

Every citizen in the Philippines earning an income must file income tax returns; it’s a mandatory obligation. Without taxes, a government can’t work. Without taxes, there’s no infrastructure and development. Simply put, a country will never function without taxes. That is why it is one of the standard requirements in buying a house and lot in the Philippines, like in Lumina Homes.

So, what if you don’t pay taxes? Basically, you have no right to complain about how the government responds to your needs. In fact, you’ll be penalized once you get caught not paying or under-declaration of taxes.

How about those individuals under the poverty line? They don’t pay taxes, or are they required to file one? Then, why do some business owners pay only little taxes? All these questions may be popping out of your head.

To give you the upper hand, read through this comprehensive guide to understand an annual income tax return.

What is an Income Tax Return?

By definition, according to the Bureau of Internal Revenue (BIR), an income tax return (ITR) is a tax on an individual’s income. It includes the salary, the practice of a profession, profits from the property, the conduct of business or trade, and gross income of pertinent items.

In context, any tax-paying individual or company must file an ITR annually. However, the income of a taxpayer or a taxable income can be divided into the following categories:

• Compensation Income

This is an income that comes from salaries, commissions, taxable bonuses, fringe benefits, and honoraria. Thus, it comes from an employer-employee relationship.

• Business and Profession Income 

This type of income comes from the trade or business income, professional fees, rental income, and gains from the exchange or sales of assets. Also, income from freelancing services belongs to this category.

• Passive and Other Sources of Income 

This comes from bank deposit interests (foreign and local currencies), royalties, winnings or prizes, dividends, informer’s rewards, and other non-professional related income. It also includes capital gains from the sales of stock shares and rental property sales.  

Who is Required to File Annual Income Tax Returns?

All citizens living in the Philippines receiving compensation income from within or outside the country are subject to taxes. So, if you are earning or have a job, you must file an income tax return.

If you’re employed, the company will file ITRs for you, but if you’re a business owner or a freelancer, you must file them yourself.

Based on BIR mandates, the following are required to file income tax returns:

• Employed both public and private companies
• Self-employed individuals, either doing business or freelancing
• Mixed-income earner, receiving salary and self-employed income
• Marginal income earner, income that comes from livelihood such as farmers, fishermen, sari-sari stores, carenderia, etc.)
• Individuals who earn from non-related business or non-profession practices
• Non-residents citizens, OFWs, or individuals working abroad
• Non-resident Aliens or non-Filipino citizens who are earning within the Philippines
• Domestic corporations and partnerships whose income are from sources within and outside the country
• Foreign corporations and partnership entities receiving income from sources within the country
• Estate and trusts involved in business and trade

Who is Exempted from Filing Income Taxes?

Based on the amended Tax Reform Acceleration and Inclusion Act (TRAIN) from Section 232 of the Tax Code, the following individuals are exempted from filing tax returns:

• A minimum wage earner whose annual income is below P250,000
• Individuals whose gross income does not exceed their total personal and additional exemptions
• Individuals whose income does not exceed P60,000 from a single employer and income tax were correctly withheld. 
• Individuals who have been subjected to final withholding tax
• Eligible for substituted filing
• an overseas Filipino worker whose income derived solely from sources outside the Philippines
• Non-resident citizens who remained living outside the country and leave the country before the taxable year, work and earn income abroad  

When to File Income Tax Returns?

The filing date is on or before the 15th of April every year, covering the income from the previous taxable year. Individuals who fail to meet the deadline will be penalized with a 25 percent surcharge of the tax due and a 20 percent interest per year from the payment deadline until the total amount paid.

3 Types of ITR Forms

Before heading to the BIR offices, make sure you know the ITR forms you need to fill-up.

1. Form 1700

This type of ITR form is intended for individuals with no other income sources but purely compensation income or employment salary.

2. Form 1701

This form is designed for mixed-income individuals and those who earn income from a business or side profession, such as freelance content writers, consultants, etc.

3. Form 1701A

This form is solely intended for individuals whose income is purely business, the practice of the profession, and those under the graduated income tax rates.

Aside from these forms, you need to include a Certificate of Income Tax Withheld on Compensation (Form 2316), Form 2304 or Certificate of Income Payments not Subjected to Withholding Tax, a tax debit memo, and proof of excess tax credits.

How to File an ITR in the Philippines?

There are three (3) options to file an ITR in the Philippines. These are manual filing, eFPS or Electronic Filing and Payment System, and Electronic BIR Forms or eBIRForms.

1. Manual Filing

Individuals who can file their taxes manually are those who are exempted from electronic filing an ITR, such as senior citizens and persons with disabilities (PWDs). It also includes those individuals who were not able to file electronically due to system maintenance or technical errors. Here’s how to file manually:

• Get your ITR forms from the information desk officer, and fill up three (3) copies of the duly accomplished BIR form. You can also download and print these forms via the BIR website.
• Head to your designated Authorized Agent Bank (AAB) of the Revenue District Office (RDO). Then, submit the completed ITR forms and the required documents to the Revenue Collection Officer.
• Pay the required income tax dues, if any, and then receive a stamped and validated copy of the BIR form.

2. eFPS

You can only file and pay your income tax via eFPS if enrolled in the system.

• Log in to your account and choose the type of forms that applies to your category.
• Enter the required fields and click the “Proceed to Payment” button.
• Choose your preferred mode of payment. You will be directed to another form, so fill it out and click the “Submit” button.
• You will again be directed to another page, which is the landing page of your preferred mode of payment, and then pay the required taxes.
• Wait for the email confirmation once you have successfully paid your taxes.

3. eBIRForms

The quickest, most accurate, and most convenient way to file an annual income tax return is via eBIRForms. It's a tax preparation software that enables taxpayers to file their ITRs within the BIR system.

eBIRForms consist of online and offline packages. An online package accepts online submissions of ITR and automatically computes penalties for late filing. Meanwhile, an offline package allows the taxpayers to encode the data offline, edit, save, print, validate and submit the ITR within the system.

• Download the latest version of eBIRForms online. 
• You only need to fill up the required details, validate and submit.
• Wait for the confirmation via email. 

Investment Opportunities Await for Responsible Taxpayers

Filing income tax returns may be overwhelming, but it also offers a great advantage for responsible taxpayers. You have an excellent opportunity to make an investment, such as acquiring an affordable house and lot for sale, since it is a standard requirement for homebuyers.

Whether employed or self-employed, you can apply for housing packages in Lumina Homes. You're not only getting an affordable house and lot, but you will also be living in a sustainable residential community. 

Do you need assistance on how to avail of our housing packages? Contact our accredited sellers today in our 50 locations nationwide.