You may have heard it before: “Minimum wage earners are tax-exempt.” But what does that really mean? And more importantly, does it apply to freelancers or self-employed individuals earning minimum wage-level income?
If you’re freelancing full-time or doing side gigs while earning below or around the minimum wage, you’ve likely asked this. You don’t want to pay unnecessary taxes—or worse, fail to file when you should.
Let’s dive into whether minimum wage is taxable and what freelancers should actually do about it.
What Does “Minimum Wage” Mean?
Minimum wage is the legally mandated lowest daily or monthly wage that employers must pay workers in the Philippines. Rates vary by region, based on Wage Orders from the Regional Tripartite Wages and Productivity Boards.
Here’s the catch: The tax exemption applies to employees, not automatically to freelancers or the self-employed.
According to the BIR (Bureau of Internal Revenue), minimum wage earners (MWEs) are not subject to income tax—but only if they are formally employed and receiving minimum wage. This includes their holiday pay, overtime pay, night shift differential, and hazard pay.
Why It Matters for Freelancers
As a freelancer or gig worker, you’re not considered a minimum wage earner—even if your monthly income is below regional wage rates.
You’re self-employed, so your income is still taxable—but only if it exceeds ₱250,000 annually under the TRAIN Law.
That’s the key: It’s not about minimum wage; it’s about your taxable income threshold.
If your annual income is ₱250,000 or below, you are exempt from income tax, but you still have to register with the BIR, file tax returns, and submit required forms.
How Tax Applies to Low-Income Freelancers
Here’s a step-by-step guide for freelancers earning near or below minimum wage:
1. Register with the BIR
Even if you earn below taxable thresholds, you must register as a self-employed individual or mixed-income earner.
2. Choose Your Tax Type
- 8% Optional Income Tax on gross receipts (if income exceeds ₱250K and you’re not VAT-registered).
- Or Graduated Rates with allowable deductions.
3. File Quarterly and Annual Returns
- Even if zero income: File “no income” tax returns to avoid penalties.
4. Track and Compute
- Use a simple income tracker to see if your gross income crosses ₱250,000.
5. Pay Tax Only When Due
- If below ₱250,000 annual income, you’ll still file—but pay nothing.
When Minimum Wage Exemption Applies
Who qualifies?
- Employees receiving statutory minimum wage.
- Covered under the Labor Code.
- Earnings include basic pay and legally mandated benefits.
Who doesn’t?
- Freelancers
- Online sellers
- Content creators
- Contractual workers not covered by employer-employee rules
When does exemption apply?
- Only while consistently earning minimum wage and classified as an MWE.
Tips for Freelancers Earning Below ₱250K
Don’t assume you’re tax-exempt just because you earn little. You need to look at your annual income, not monthly.
File even with zero income to stay compliant and avoid penalties.
Register now—late registration carries a penalty.
Use accounting apps or spreadsheets to track total receipts.
If you’re unsure, book a consultation before deadlines hit.
The belief that “minimum wage is tax-free” is true—but only for employees. Freelancers still need to register, file, and stay updated with BIR rules, even if they earn less than traditional workers.
Your income matters—but your compliance matters more.
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