Freelancers often lose money because of simple tax mistakes. One missed document can mean wrong withholding or penalties. This topic matters because it affects your take-home pay. It also affects how clients withhold tax from you. Let’s break it down clearly and simply.
What Is a Sworn Declaration and Inventory List?
A Sworn Declaration is a document you submit to BIR and your clients. It tells them how you are taxed for the year. Most freelancers use it to claim the 8% income tax rate.
An Inventory List is a report of goods you have at registration. It applies only if you sell products, not pure services.
Why This Matters to Freelancers
If you submit the correct sworn declaration:
- Clients withhold the right tax.
- You avoid over-withholding.
- Cash flow improves.
If you ignore the inventory list:
- BIR may impose penalties.
- Your registration may be questioned.
How to Submit a Sworn Declaration (Step-by-Step)
- Choose your tax type for the year.
- Decide if you qualify for the 8% income tax.
- Prepare your Sworn Declaration form.
- Submit it to BIR.
- Give a signed copy to each client.
Do this every year if you want the 8% rate.
Sworn Declaration BIR: Who Must Submit?
You must submit a sworn declaration if you are:
- A freelancer or professional.
- Earning from clients who withhold tax.
- Availing of the 8% income tax rate.
Are 8% VAT Included?
No. The 8% is NOT VAT.
Here is the clear rule:
- 8% is an income tax option.
- VAT is a separate business tax.
- VAT-registered taxpayers cannot use 8%.
If you are VAT-registered, you do not submit a sworn declaration for 8%.
When Is the Inventory List Required?
You must submit an inventory list if:
- You registered a business with goods or products.
- You had inventory at the time of registration.
Deadline:
- Within 30 days from BIR registration.
Pure service freelancers:
- No inventory.
- No inventory list required.
Practical Tips for Freelancers
- Submit your sworn declaration early each year.
- Keep signed copies for all clients.
- Do not mix up 8% and VAT rules.
- If you sell goods later, update BIR records.
- Always match your registration with your actual work.
Sworn declarations protect your income. Inventory lists protect your registration. Both are simple when done correctly.
Freelancers who understand this pay the right tax. They avoid stress, penalties, and cash flow problems.
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