Visas and Work Permits — 9 min
If you're thinking of becoming an independent contractor in the Philippines, then congratulations: you're about to embark on an adventure as diverse and exciting as the coral reefs of Boracay.
Whether you’re looking to set up shop amongst the chaotic excitement of Manila, the green tranquility of Batanes, or the dreamlike white-sand beaches of El Nido, these wondrous islands are an ideal locale for mixing work and lifestyle.
Before you can fully embark on your self-employment journey, though, you’ll need to know how to:
Register your business in the Philippines
Avoid misclassification as an employee
Create compliant contracts that protect you
Invoice and collect payments from around the world
In this article, we’ll cover all these things, and help you navigate your tax responsibilities as a self-employed worker. We’ll also discuss some of the other risks and liabilities you should be aware of, so let’s begin.
First, it’s important to clarify how the Philippines defines independent contractors.
Independent contractors are workers who provide paid services (or products) to another party. However, they are classified differently to employees, and are usually not entitled to the same benefits, such as paid leave, sick days, and minimum wage. On the flip side, contractors have more freedom and flexibility in the way they work.
In the Labor Code of the Philippines, there is no specific section dedicated to independent contractors. However, based on guidelines within the code, you are generally considered to be a contractor if you:
Determine your own work schedule and working hours
Perform work for other companies
Set your own rates and scope of work
Provide your own tools or equipment
Are not integrated into the company and its operations (i.e. you don’t have an internal email address)
Are able to delegate or subcontract work
Work without direction or supervision
When you work with clients, it’s important to be correctly classified to avoid penalties and fines, and to ensure that you are paying the right taxes.
As an independent contractor in the Philippines, you should be careful to avoid prohibited work arrangements and follow local labor laws.
Before you can begin working as an independent contractor in the Philippines, you’ll first need to choose a formal structure for your business. Some of the most popular models for sole owners include:
Sole proprietorship: A common, simple structure that is ideal for independent, individual contractors. You have full control of the enterprise, although there is no legal separation between you (the owner) and the business; you are personally responsible for all its debts and liabilities.
One Person Corporation (OPC): A formal, legal entity introduced in May 2019. It is legally separate from you, the individual. All income and losses are attributed to the company as opposed to you personally (i.e. you are only liable for the capital you invest in the company). The tax and legal responsibilities of an OPC are far more demanding and complex than those of a sole proprietorship; you will also need to register with the Securities and Exchange Commission (SEC).
If you are working with additional partners (natural or legal), you can also incorporate different types of companies, or enter into a partnership. If you’re unsure which structure is most suitable for your business, it’s a good idea to speak with a registered solicitor or accountant.
If you do opt for the sole proprietor structure, you will need to complete several steps:
Register your business with the Department of Trade and Industry (DTI) at your nearest DTI office. You must also register your business name through the Business Name Registration Service (BNRS). You can do this online, or complete and submit the form when you attend the DTI office.
Secure a business permit from your local government unit (LGU). Depending on where you are based, this is usually a mayor’s office, or a barangay office. The requirements for obtaining this permit will vary depending on your location.
If you don’t already have one, acquire a tax ID number (TIN) from the Bureau of Internal Revenue (BIR). To do this, you will need to complete BIR form 1901.
Register with the Social Security System (SSS) (if you haven’t already done so). To do this, fill out SS Form RS-1 and submit it to your local social security office.
Depending on your business activity, you may also be required to register with your relevant regulatory authority.
As an independent contractor, it’s down to you to handle your invoices and payment collection. Unfortunately, this means billing each client individually and collecting payment through their preferred payment method — which can be inefficient and time-consuming.
Some of the most common ways to collect payments include:
Digital transfer services like PayPal and Wise
These methods all have their own pros and cons. For instance, bank and digital transfers can be pretty quick, but often come with hefty service fees. And if you have clients in other countries besides the Philippines, the payment collection process can be even more complicated.
Alternatively, you can use a trusted solution like Remote. Our platform is a simple, secure, and reliable way to get paid quickly in Philippine pesos — and with no hidden fees. Learn more about how our platform can help.
As an independent contractor, you’re responsible for filing and paying your own taxes.
The good news is that, as a sole proprietor in the Philippines, you pay personal income tax on your business profits (using your personal tax number). This means that you do not have to fill out a separate tax return.
Like most countries, the Philippines has a progressive income tax rate system. Depending on how much you earn, you pay a set flat amount plus anywhere between 0% and 35% on the excess. If your gross income is below the VAT threshold of ₱3 million (around $54,000), you must also pay an additional business tax of 3%.
You must file your tax return (BIR form 1701) by April 15 each year.
Note that if your gross income is above ₱250,000 (around $4,500) but below the VAT threshold, you can instead choose to be taxed at the flat rate of 8% (using BIR form 1701A). This can have potential ramifications, so it’s a good idea to speak to a competent tax professional before you choose a regime.
You must also make monthly social insurance contributions to the SSS. Currently, these contributions are around 14% of your income, up to a maximum of ₱20,000 (around $360) per month. Contributions to PhilHealth — the Philippine health insurance system — are optional.
You can learn more about taxes in the Philippines on the BIR website.
If your gross annual income exceeds ₱3 million, you must register for — and charge your clients — VAT. These payments are due each quarter, using BIR Form 2550Q. On the flip side, you can claim back VAT on your business expenses, if applicable.
The standard VAT rate in the Philippines is 12%, although some goods and services are charged at the higher rate of 18% and the lower rate of 0%.
As a sole proprietor, you are personally liable for finance and tax debts, which means your private assets can be forcibly used to settle your business debts. Many independent contractors purchase liability insurance to help mitigate this risk.
It’s also important to cover yourself when drafting and signing agreements with clients. Our legal experts can provide you with fully compliant contract templates, for both Philippine and international clients.
As a sole proprietor, you do not need to publish financial statements or accounts. However, you should still keep organized, accurate records of all your income and expenditure (including client invoices, purchase orders, bank statements, and receipts). This will help you correctly file your taxes, give you a stronger picture of your financial situation, and generally make life easier if you are audited by the tax authorities.
You can either manage these records yourself using an accounting or bookkeeping tool, or hire a professional bookkeeper or accountant.
As we’ve mentioned, independent contractors are classified differently to employees in the Philippines. Many of the protections and benefits employees enjoy do not typically apply to contractors.
As a result, companies may deliberately misclassify you to circumvent their legal obligations, while at other times, it may happen accidentally. Whether it’s intentional or not, misclassification can result in penalties and fines for both you and your client.
As an independent contractor, you can work with your clients to ensure this doesn’t happen. Discuss your role and responsibilities with them, and review the working arrangement regularly.
If your working relationship changes over time and you become more integrated into a client’s company, you can ask to be converted into an employee.
Open a dialogue with your client and carefully discuss the risks and benefits of moving to an employer-employee relationship. In particular, be clear about how it can benefit both parties — not just you.
You can even suggest the help of a third-party solution, such as Remote, to ease the transition. Our global employment services help both parties stay compliant by taking care of key HR functions (like payroll management and benefits administration) in line with Philippine law.
As you can see, there’s a lot to take on board when setting up as an independent contractor. Remote can help you with many of these challenges, allowing you to focus on growing your business and delivering to your clients. Here’s how:
Navigating all of your clients’ different invoicing, approvals, and payments systems can be complicated and time-consuming. And manual methods of invoicing and collecting payments can increase the risk of fees, errors, and delays.
Remote gives you access to a highly secure, streamlined dashboard that makes invoice management and international payments cost-effective and efficient. You can use our platform to get paid in Philippine pesos (or other currencies), without any hidden fees.
When you draft agreements and contracts for your clients, you run the risk of non-compliance with local labor laws — especially when working with international clients. Remote offers localized contracts tailored to Philippine laws, ensuring that you stay compliant. Our legal experts can also provide guidance on complex issues, such as local classification and intellectual property protections.
With Remote, you no longer need to rely on spreadsheets and other manual tools to invoice for payments; we remove many of the inaccuracies and delays caused by archaic processes and manual management. Our platform lets you create invoices, submit them for approval, and subsequently get paid in your local currency without needing to switch to any other tool or software.
Tax management is notoriously complex work. Remote helps you quickly and efficiently deal with tax management by compiling data about your income based on your invoices and payments received.
Having the freedom and flexibility to work on your own terms is liberating. But your administrative responsibilities can distract from what you really want to be doing: helping your clients, delivering great work, and collecting invoices.
By using a stable, trusted platform like Remote, you can manage these obligations quickly and efficiently, allowing you to focus on your business goals. Specifically, we can help you:
Avoid intermediary fees and delays with international client payments
Draft compliant contracts for Philippine and foreign clients
Enhance your invoice management and avoid manual processes
Comply with local labor laws regarding work practices
Our platform makes it quick, simple, and seamless to get started as an independent contractor. Learn more about how our expertise can save you time and resources today.
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