Philippines - A Tax Haven?
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- เผยแพร่เมื่อ 24 ก.ค. 2024
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The Philippines has possibly gone under the radar when people talk about tax havens, but if you have foreign sourced income, it can be one of the best places to be a tax resident. In this video I take you through some of the details of their tax friendly regime.
0:00 Introduction
0:53 Philippines tax rules overview
2:48 Source of income - caution for digital nomads
3:22 Foreign entities don't necessarily protect you
4:17 Tax enforcement - does the Philippines actually care?
6:39 Summary
A BIT ABOUT ME
I've been advising on international tax since 2014, and qualified as a Chartered Accountant in 2018. I worked for consulting firms PricewaterhouseCoopers and BDO, before I started a remote international tax consultancy firm, Degen Tax Advisers, in 2020.
I work with online entrepreneurs to help them navigate the complex world of international tax. I work with e-commerce businesses, digital nomads, content creators, tech startups, crypto investors and many more in the digital space. Like my clients I'm pretty nomadic. I've lived in the UK, US, Japan, South Korea, China, Malaysia, Thailand, Vietnam and Singapore. Currently I'm spending most of my time around Southeast Asia.
DISCLAIMER
My videos are for general guidance, education and providing you an introduction to the concepts of international tax. They in no way constitute specific advice to your specific circumstances. I accept no liability for any reliance placed upon the content of these videos or references, therein.
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Excellent as always 👨🍳
Great video that compelled me to pay for an hour of Andy’s time. Very helpful and cleared up lots of questions I had as well as clearing up some previous mixed advice. Highly recommend contacting Andy.
Thanks a lot Stephen, much appreciated and was great to meet you.
Thank you. very clear.
Great stuff Andy, could you do a video on Vietnam too? Cheers
Thanks for the kind words! Yes I’ve spent some time in Vietnam recently & will be providing some information on the tax situation there - just give me a shout if there’s anything specific you’d want me to cover
Great video I am canadian and planning to retire in the Phillipines do the dividends/distributions from my tax free savings account get taxed in the Phillipines
Remember, your money is only protected in Philippine banks up to 500,000 PHP. About £7200 or $8,800.
Can you open a bank account there easily when you arrive? Do you need a visa to stay long term?
Good to know thanks
love it
Great informative video. How do the Philippines look upon dividend income in a brokerage account? If I have a Philippine tax ID assigned to my brokerage account but then in subsequent years do not spend 180 days in the country will they still look upon my dividend income as sourced in the PI?
Thanks for the kind words - having a Tax ID linked to a broker account doesn't necessarily mean the brokerage assets are taxable. it depends on the underlying assets in your account. If the assets are stocks in foreign companies then they're not taxable to you in the Philippines.
If these underlying assets are in the Philippines, then this would be locally sourced income. Locally sourced income would be taxable even if you left the Philippines. A non-resident alien is taxed on dividends at the rate of 20% (for those engaged in trade or business in the Philippines).
Interesting stuff- I’m looking at retirement in Philippines- would have uk pension and 2 other pensions coming in ( plus savings)- thing is I find the declarations confusing- do I need to fill in uk tax returns? Or tell the uk government I’m gone and not to tax me? ( it’s not going to be much over the uk tax threshold anyway). Is there any simple way to arrange things?
Hi Rob, from the UK side you would usually advise your pension provider after you've moved to the Phillippines that you are now non UK resident. This would stop them from withholding tax from your pension income. You would then not have to fill in a UK tax return (unless you had some UK sourced income such as UK rental property).
Hi Andrew, I scheduled an appointment later this week with you for 3 pm Dublin time but it is coming up as 10am Indochina time. Can you check its correct. Thanks
Hi Dave thanks for scheduling - I'll email you to fix this if necessary as sometimes Calendly gets a bit off when timezones are not alligned. Is it 3pm Dublin time on Thursday you would like?
Very interesting content. Thank you. I plan to retire in the Philippines. My US broker and European bank (where I receive my pension) both require a local tax ID nr. , probably called TIN. Could you please elaborate how to get such a TIN number as a foreign retiree??
Hi, thanks for the kind words. So generally you can do this on their online e-registration portal but for some reason this is down at the moment. www.lamudi.com.ph/journal/tax-identification-number-philippines/
However, you can also visit a BIR office, there are 19 across the country: www.bir.gov.ph/index.php/contact-us/directory/regional-district-offices.html
They will ask you to fill out Form 1904 which asks for basic details (name, date of birth, address etc) They will also ask for other documents (usually passport, visa, proof of address). Once that's done it will all be submitted for processing - this can take between 5 days to 4 weeks typically.
Hi Andy, thanks for the information. Just wanted to bounce a question off you which you may know. I moved from Scotland to Bahrain in 2012 and set up a QROPS investment held in Gibraltar. In 2018, I changed to a SIPP held in Isle of Man (IOM). Bahraini residency got me tax free exemption 2012 till now. Next year I will move to Philippines and lose my tax-free exemption there. I will take a Filipino married tourist 13A visa but spend 180-300 days in Philippines, therefore residing there, not UK. I will have my state pension which I assume is taxable? Will this be covered by my personal allowance as I have 35+ years NI contributions? The $64,000 question is, will any draw down from my SIPP be taxed from IOM as UK tax, OR does living in the Philippines exempt me? My annual draw down will be around £15,000 from IOM to Philippines.
Is working remotely for a US company considered locally sourced if I’m in the country for over 6 months? Not my company, but employer. Great videos thanks for the info
Thanks for the kind words - it can be deemed foreign sourced in certain circumstances; the key thing which could trigger local sourced income would be the creation of a Filipino permanent establishment via your activities. You should check the PE section (article 5) of the double tax treaty between PH and the US www.irs.gov/pub/irs-trty/philip.pdf which broadly means you have PE in the PH is you 'habitually exercise an authority to conclude contracts' on behalf of the US company - e.g signing deals with customers, suppliers etc and doing this on a regular basis.
if I have other citizenship from a zero tax country and used that citizenship to invest in forex, cryptocurrency, dividends, bank interest, etc and remit it to the Philippines to myself will I be tax on it?
Andy can you do a video about setting up a business and Tax legislation in Vietnam. Asking for a UK expat with Vietnamese wife
Hi Chris, yes I'll be in Vietnam from next week and plan to cover a few aspects of Vietnam's tax system.
Does day trading from the phillipines with a foreign broker account linked to an US LLC company (that would belongs to me) is considereted as an activity and should be taxed in the philippnes regarding gains if i am fiscal resident there ?
Hi, this firstly depends on your citizenship. If you're Filipino citizen, then this would be taxable. If not, then its a bit more of a grey area. The assets traded could be a key factor here. For example, if via the brokerage account you're trading US commodities, then there's a strong argument that the profit generated is still being sourced from outside PH. If you're trading local assets then this is likely to be considered taxable locally sourced income.
Thanks, appreciate your answer, in my case it is US futures securities like SP500, I am european citizen origin, so as i undestand this fall in a grey area where I am more not supposed to pay taxes on that in Philippines. I don't undestand why they keep such grey area as trading foreign securities should be clear.
@@jeanpouet4380 Yes agreed, unfortunately most tax authorities keep their tax codes open ended and broad without giving explicit guidance on specific situations - however in your case as long as the assets are traded securities on foreign stock markets such as SP500, then the value of the underlying securities is derived from activities abroad, meaning these securities themselves derive their value from foreign sourced income, thus any gains/losses associated with trading these can be treated as foreign sourced. Further, your LLC being the trading entity gives further protection here,
If all you live on is Social Security from the US, you don't even have to file a US tax return, especially if you have no withholding and do not owe any taxes. So far, the threshold for filing has not gone above the standard deduction. However, I continue to file because a lot of the government stimulus is based on whether you filed. The VAT is the main tax we pay as ex-pats. I am a permanent Alien Resident, and the government has never told me I need to pay Philippine taxes on my foreign Social Security Income.
Hi Andy, I tried to book a meeting through your link, but since I'm a resident in Thailand, I can't use PayPal. Can I contact you via email and arrange an alternative payment method?
Hi John, thanks for pointing that out - yes feel free to reach out via advisers@degenwealth.com
Does income from the foreign company count as locally sourced because one is producing that income in the country and creating a permanent establishment / acting as its agent there or because it counts as a controlled foreign corporation?
Hi, this is a good question and the underlying reasons why the foreign company can be taxable is case dependent.
Whilst the Philippines does not have CFC rules to worry about, they do have Permanent Establishement rules which will bring a lot of foreign companies with service providers into the scope of corporate tax. So certainly a lot of small businesses could potentially be argued to have a PE via an agent in the Philippines (perhaps the business owner themselves).
Further, they also tax dividends from businesses "Effectively connected with the business in the Philippines" - this wording is very similar to the US tax code wording with similar interpretation - basically effectively connected means the income has a close relationship to the trade, business, or commerce taking place within the country. So even if its a foreign registered company, doing any business with the Philippines (clients, staff, customers etc) could fall under this definition.
In both above scenarios, someone with a remote online business could risk falling under either the PE or effectively connected scope for corporate tax purposes.
@@WorldTaxAndy Thank you for the detailed response - I don't have any plans for residency in the Phillipines but the similarities and contrasts with other regimes are quite interesting.
I have a foreign Ltd company wanting to set up an office in the Philippines. Its income would be entirely foreign sourced but would employee Filipinos. From what you're saying it sounds like it would need to pay PH tax. How does such a company avoid double taxation? Is the PH tax paid seen as a deductible expense in the home country?
Hi, it would depend on the country of the Ltd company. If it has a double tax treaty with PH then this will ensure no double taxation occurs. But even if not, PH offers foreign tax credits for taxes paid abroad on the same income, so in most case you will not have to pay any additional tax in PH.
Are you aware of Revenue Memorandum Order (RMO) No. 51-2019? From what I have read it would throw a spanner in the works for many considering retirement in The Philippines and expecting some beneficial treatment of tax.
Hi, yes this may affect some - it highly depends on what country you are from and what your income is. Generally I would see it impacting those who have tax deducted at source, and are expecting to be able to receive their income gross thus pay no taxes anywhere.
Basically the Philippines won't issue a certificate of proof of your tax residency because you're not really considered a full tax resident (without being a Filipino citizen).
So lets say you have Australian sourced income & wanted to tell Aus that you're a Filipino resident thus shouldn't be taxed at source in Aus - you might have issues convincing Aus to stop doing this if they can't see proof from the Filipino side.
Nevertheless it all depends on the proof required by the home country. I know many UK citizens who have informed their pension provider to stop withholding tax at source on the basis of their foreign residency - the provider has just asked for an address & nothing else (i.e no residency certificates). So in practice, I don't think it's going to impact everyone, but its worth considering.
@@WorldTaxAndy Thanks for the reply Andy. Is it not HMRC that issue a new tax code to the pension provider once HMRC have received evidence of tax residency overseas? From what you said above, retiree can can approach pension provider directly and bypass HMRC?
@@silversurfer6758 No problem. I've seen it work both ways. What I think happens often in practice is that you notify the pension provider, then the provider notifies HMRC about the situation (similar to what an employer would do) and HMRC update their records / tax code accordingly.
Note: the UK does not need a proof of tax residency abroad for you to be considered non UK tax resident. The only law which pertains to tax residency in the UK is the 'Statutory Residency Test' (SRT) and within that there is no requirement to have a tax residency elsewhere. So even if you reach out to HMRC, they shouldn't be asking you for a tax residency certificate because it's irrelevant to the SRT.
This differs from a lot of EU countries which DO require you to have a new tax residency, hence why some want to get tax residency certificates to present to their tax authority, but the UK is a bit of an outlier in this regard - the certificate means nothing to them and they only want to know whether you meet or do not meet tax residency via the SRT
(so this also this works to the downside of others in the opposite situation e.g they do obtain a tax residency certificate - say from Dubai, Indonesia, Paraguay etc which are easy to obtain - and then they present this to HMRC hoping this means something. But in reality HMRC see this is a piece of paper and if they see that you spent sufficient days in the UK and meet residency under the SRT they simply don't care about what residency paper you present them. So some have to be careful when being sold 'tax residency' certificates which I've seen become more common online these days)
I was just wondering: what about cryptos, NFTs and anything related to any country ? Do you have to declare your benefits in PH when you live there more than 180 days/y ?
Hi, generally no if you're not a Filipino citizen, because these will usually be considered as foreign sourced income thus outside the scope of PH taxes. For crypto, you'd want to ensure you're not trading on any Filipino exchanges to avoid it being considered locally sourced.
@@WorldTaxAndy That's a wise answer. Many thanks.👍
Your my new
..go to guy ..for Philippines tax stuff..
Im in Southern layte..sogod...
Where are you based?
Thanks, appreciated it! I was in Palawan for a while but I'll need to check out Southern Layte next, heard great things!
just for info as a tourist who stays 365 days in philipines you dont even have a tax number. thats I call real tax heaven
The Bureau of Internal Revenue would not have the no with all of how to investigate foreign sourced income. In addition they don't want their agents shaking down foreigners who are patronizing businesses owned by the top 1 percent of the Philippines.
Lots of Bureau of Internal Revenue either accept bribes...then they are an owned person OR they don't accept bribes and then they could be rubbed out. I knew a few agents who resigned because they didn't want to be caught in this lose lose situation. They had a few coworkers who were rubbed out.
Not strictly a tax point, but if you are a British retiree in the Philippines your state pension is index-linked to inflation. In most other Asian countries it isn’t.
Very interesting thanks - had no idea of this. Could be a huge factor in favour of Philippines for retirees
I’m glad that was useful. Source: www.gov.uk/government/publications/state-pensions-annual-increases-if-you-live-abroad/countries-where-we-pay-an-annual-increase-in-the-state-pension
I heard as a foreigner you cannot own land but you CAN own property 🤔
Yes I understand this is the case - I'm not a property expert but from the people I work with who are in the Philippines, they say it's easy to buy a condo (if the building is mostly owned by Filipinos) but difficult to buy a house