Online income declaration and taxes
There are several path to take on this issue. Although this is only based on my experience:
- Register a business as a single proprietor or corporation. If you feel that your business will have significant volume, then this may be the way to go.
- Register as a professional at the BIR. This is the path I took where I registered as a professional declaring myself as a consultant. Through it, I am able to issue official receipt to any payment I received and file income reports as necessary.
- Ask the company to issue the payment to you as a professional deducting all taxes concerned.
For number 1, another way to do it also is partner with a company who can accept payment in your behalf as necessary. I use this model whenever I have trainings and corporate members signing up in the DigitalFilipino.com Club.
For number 2 and 3, the payments we receive oftentimes get deducted with professional taxes. Make sure they issue a 2307 (Certificate of Creditable Tax Withheld at Source) that you can attach to your annual 1701 filing. For the year 2006, our deadline is today.
The challenge with number 2 is that BIR has rules on tax deductions and documentation requirements whenever your income exceeds 750,000 (if I'm not mistaken). This includes having a Certified Public Accountant issue a certification attesting to the accuracy of your 1701 or Annual Income Tax Return.
For the items where you issue an official receipt, once you go beyond the 750,000 (If I'm not mistaken) amount of receivable, you will also be converted to VAT status where you have to remit the 12% VAT. Below that is the usual 3%.
For more info on this, I suggest consulting an accountant. This is a must especially if you pay six figure taxes annually, net of allowable deductions. There are rules to be followed here and that is why I got an accountant on retainer for this purpose.
Just an idea, I remember that Wilson Chua said during his iBlog3 talk that there's a good number of iBlog3 participants who are also accountants. I hope you can blog about this stuff and make it reader friendly. It will surely be helpful!
Have a great week ahead! :)