Occupational Tax Receipt - OTR Meaning and Requirements
Key takeaways:
- The OTR is for freelancers who earn more than ₱250K a year
- You need it to register your business with the BIR
- Not all cities and municipalities issue OTR
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Table of Contents
If you are a freelancer, you must pay and get your occupational tax receipt or OTR, as it is an important document to prove that you paid your taxes.
The occupational tax receipt is like a professional tax receipt, or PTR. However, the PTR is for licensed professionals, like doctors, lawyers, and engineers. The OTR is for freelancers who do not need a license, like a writer or a theater performer.
The OTR is important because you need to if you will go to the Bureau of Internal Revenue to pay your taxes, or if you want to register for a TIN. Today, you will learn the OTR meaning and how to get one.
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What is OTR meaning
In the Philippines, an Occupational Tax Receipt (OTR) is a document issued by the local government unit (LGU) to individuals or businesses engaged in a profession, trade, or occupation within their jurisdiction. This tax is also known as a professional tax, community tax, or residence tax.
Occupational Tax Receipt (OTR) is a tax that is levied on individuals and businesses engaged in any form of business or occupation. This tax is typically paid by business owners, traders, and other individuals who are engaged in a trade or occupation. The OTR is also issued by the local government unit where the business or occupation is conducted, and it serves as proof that the individual or entity has paid the required tax.
How to Get
Professional Tax Receipt or PTR in the Philippines
The OTR is usually obtained annually and must be renewed every year. Failure to pay the OTR may result in penalties, fines, and other legal consequences. The revenue generated from the OTR is used by the LGU to fund local development projects and services, such as healthcare, education, and infrastructure.
While both PTR and OTR are types of taxes that individuals and businesses may be required to pay, the main difference between the two is that PTR is specifically levied on licensed professionals engaged in the practice of their profession, while OTR is levied on individuals and entities engaged in any form of business or occupation.
Can the terms Occupational Tax Receipt and Occupational Permit be used interchangeably in the Philippines?
No, the terms Occupational Tax Receipt and Occupational Permit cannot be used interchangeably in the Philippines. An Occupational Tax Receipt is a tax that individuals and businesses engaged in any form of business or occupation are required to pay to the local government unit, while an Occupational Permit is a document issued by the local government unit that grants permission to individuals or businesses to engage in a specific occupation or trade. While both are required to conduct business or engage in a profession in the Philippines, they are distinct and separate requirements.
Eligibility Criteria and OTR Requirements
The OTR is something you get and pay in your City Treasurer’s Office. To qualify, you must meet the following OTR requirements:
- You must be a working person whose job does not require a license
- You must be a freelancer, not a registered business or employee
The fee for the OTR is around ₱200. To get one, we will show you the step-by-step process later on. There is no occupational tax receipt sample as it is a private document that no one shows.
Relevant Laws and Regulations Governing OTR
The legal basis for the OTR is provided in Section 143 of the Local Government Code of 1991 (Republic Act No. 7160)(1), which grants LGUs the power to impose and collect local taxes, fees, and charges. The specific rates and regulations governing the OTR vary depending on the LGU and the nature of the business or profession.
By law, all people must pay taxes if they earn at least ₱250,000 per year. In this case, a freelancer may qualify for this law.
A freelancer is not a business entity, so there is a special law that governs this. As such, the OTR meaning BIR is simply a document of receipt. A freelancer is much more like a professional, albeit the freelancer does not need to have a license to exercise his duties and responsibilities.
It is your option to register either as a business or a freelancer. If you register as a freelancer, you will still pay taxes and issue receipts. However, you cannot have the same rights as a business entity. For instance, you cannot employ people legally.
Government Agencies Involved in the Issuance of OTR
The only agency that can issue an OTR is the municipal hall or city hall. Before you can get one, you must follow the steps we have below. You cannot get an OTR from a barangay hall or barangay captain.
How to Get Occupational Tax Receipt: Step-by-Step Guide
To get your OTR, you must first get your Barangay Clearance. The clearance must indicate that you will use it for business registration. Generally speaking, the government is not strict with this. For as long as your barangay clears you, you can get your OTR.
Learn here How to Get
Barangay Clearance in the Philippines
Once you have your barangay clearance, the next step is to go to the m municipal hall. Tell the guard that you will get your OTR.
The OTR is a new concept, and not a lot of Filipinos know about it yet. Because of this, the guard may get confused. It is better to tell the guard that you need a PTR or a professional tax receipt. From here, the guard will tell you which window to go to.
Now, speak to the clerk and say you need an OTR. Make sure you say OTR, not PTR. The clerk will give you an application form that you have to fill out. Once done, submit this to the clerk, and he will tell you to go to the cashier.
Now, you can go to the cashier and pay ₱200. From here, the cashier will copy what is on your application form and then issue you a receipt. This receipt is your OTR.
Some cities do not issue OTR. For example, Makati City does not do this. Some, on the other hand, require a health permit before they issue you an OTR.
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Fees and Penalties
There are no standards when it comes to fees and penalties. Some cities may consider it similar to PTR, where you pay ₱75 plus 2% of the cost if you pay late. Some don’t. For renewals, you just have to do the same thing over again.
What you have to worry about is a delay in paying your taxes. There are stiff penalties if you do not pay your charges in the BIR.
Here is the tax rate for the Philippines:
Table 1: Personal Income Tax Rates in the Philippines
| Income for the year | 2022 – 2023 tax rate (%) | 2023 tax rate (%) |
|---|---|---|
| 0 – PHP 250,000 (US$4,463) | 0 | 0 |
| PHP 250,001 (US$4,464) – PHP 400,000 (US$7,142) | 20 | 15 |
| PHP 400,001 (US$7,142) – PHP 800,000 (US$14,288) | 25 | 20 |
| PHP 800,001 (US$14,283) – PHP 2,000,000 (US$35,712) | 30 | 25 |
| PHP 2,000,001 (US$35,713) – PHP 8,000,000 (US$142,833) | 32 | 30 |
| Above 8,000,000 (US$142,833) | 35 | 35 |
You will not pay this tax if you are not registered in BIR. To register for the BIR, you must follow the steps in the next section.
Learn What is Income Tax Return
How to Get ITR in the Philippines
How to Apply for BIR after OTR
First off, you need to prepare the following documents:
- Form 1901 – you need three copies of this. You can only get this from the BIR, which means you really have to go there.
- Approved Form 1905 – this form indicates your Regional District Office. If you were employed in the past and you moved to a new city, you will have a hard time processing this. The problem with BIR Philippines is that it is not centralized. You may need to go to your old RDO to get this document stamped.
- Form 0605 – you also need to fill out three copies of this. Like the other forms, you can only get this from the BIR.
- Scanned Copy of Birth Certificate – you must print this, and it must be clear.
- Marriage Certificate – only if you are married.
- Copy of two IDs – you must have three copies for each ID; the only IDs accepted are government-issued ID.
You must also bring your proof of billing or proof of current address. The BIR needs this to validate your residence.
Read an information
Paano Magrehistro ng Online Business sa BIR
You do not need a Mayor’s Permit or Business permit if you register in BIR. It is because you are a freelancer, not a sole proprietorship business. If you want to register as a sole proprietorship business because you plan to have employees in the future, you will need a Mayor’s Permit.
Once you have submitted these documents to BIR, they will tell you when to come back. The next step is to print your official receipts. There are accredited printing presses that you must go to. There is a standard format for printing these receipts.
Once you have the receipts, you must go back to BIR and present it. You will leave it there for them to check. After that, you will pay processing fees. You also need to attend a seminar. It is where you will learn your responsibilities as a freelancer.
Sometimes a seminar is no longer required. Once you have paid all your fees, you will now have your documents.
These documents are:
- Your permit from the BIR
- Your Certification of BIR Registration
- A complete set of receipts that you will issue to your buyers
- Your document of Authority to Print
You will also get your book of accounts, where you will write your earnings, expenses, and balance sheet. The task for filing taxes is the same. The way you fill out the books will be the same.
If you want, it is easier if you just hire an accountant. The common rate for an accountant in the Philippines is ₱1,500 per month. At this price, you only have to give your accountant the receipts. The accountant will then process your documents with the BIR. Do not hire a bookkeeper—they have no liability for wrong filing of taxes or anything.
Only freelancers must get OTR. If you are not a freelancer, do not get one. Also, you must also get OTR if you qualify for paying taxes. If you do not earn at least ₱250,000 for a year, you do not need to pay OTR.
Summary
The OTR is the same as PTR. The PTR is for professionals who need to have passed an exam like the bar exam. OTR is for freelancers. You need the OTR to apply for tax documentation and registration with the BIR.
FAQ
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What is the difference between OTR and PTR?OTR and PTR are essentially the same things. However, PTR is for professionals, but OTR is for freelancers.
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How to update or amend an OTR?You do not have to update it. Since you get it yearly, you will also file new data at the time you get a new OTR.
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When do I renew my OTR?You can renew it once a year in January, not later than the last day of the month.
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How much is OTR in the Philippines?The cost is typically ₱200.
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How do I secure my occupational tax receipt?Go to our barangay hall first and get a barangay clearance. Next, go to your municipal or city hall.
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Why do I need to pay OTR?Even if you are a freelancer, it is your duty to pay taxes because it is a legal requirement for individuals and businesses engaged in any form of business or occupation within the local government unit's jurisdiction. Without taxes, the government will not have the money to build infrastructure such as roads.
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What is the process for obtaining an Occupational Tax Receipt in Quezon City, Philippines?To obtain an Occupational Tax Receipt (OTR) in Quezon City, Philippines, you need to go to the City Treasurer's Office located in the Quezon City Hall complex. You will need to bring a valid government-issued ID, as well as any other documents that may be required depending on the type of profession or business you are engaged in. You will then need to fill out the necessary forms and pay the required fee to obtain your OTR. Once you have paid the tax, you will be issued a receipt as proof of payment.
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How can I obtain an Occupational Tax Receipt in Muntinlupa, Philippines?To obtain an Occupational Tax Receipt (OTR) in Muntinlupa, Philippines, you need to go to the Business Permits and Licensing Office (BPLO) located in the Muntinlupa City Hall. You will need to bring a valid government-issued ID, as well as any other documents that may be required depending on the type of profession or business you are engaged in. You will then need to fill out the necessary forms and pay the required fee to obtain your OTR. Once you have paid the tax, you will be issued a receipt as proof of payment.
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