Tax In the Philippines

A Contractor's Guide to Taxes : 

One of the most consistently challenging aspects of contracting in the Philippines is complying with the country’s tax system. As well as paying tax in the Philippines, you might also still be eligible to pay some tax in your home country, and understanding the legislation behind this can be a challenge.

How do I calculate my taxable income: 

If you’re working in the Philippines under a permanent contract, many employers will handle your tax under the PAYE (pay-as-you-earn) system. This means that they calculate and process your taxes in the Philippines for you and then send you a net wage. Your income tax, public health insurance, social security and other deductions will all be covered by this payment. This is the easiest way to handle your income tax in the Philippines, but contractors may not be offered this service because of their short stay with each employer.

Anybody who can’t pay their tax in the Philippines through PAYE is left with the prospect doing everything themselves.

Do you know much about Filipino Tax Law? Does the Philippines have a tax treaty with your home country? You will need to find out or find someone who can help! Income tax in the Philippines can range from 5 to 32 percent, and you need to be sure you are placed in the correct tax brackets.

Tax Calculator: 

If you are a contractor and want a calculation on your tax and net retention in the Philippines, we can supply it to you free of charge.

Using an Umbrella Company for Income Tax : 

Contractors in the Philippines are faced with masses of paperwork and numerous wasted hours filing a tax return unless they find an alternative option. A Filipino umbrella company can act as your employer during your stay in the country whilst still allowing you the freedom of a contractor. The only difference is that you submit your timesheets to them; they’ll calculate and pay your taxes as you earn, and then you receive a net wage (as well as documentation for your records).

The companies are experts in Filipino taxation, and they’ll ensure that you keep the largest proportion of your earnings whilst complying with local laws. They can deal with any issues with the Filipino tax office or tax department directly including processing your tax refund if you are eligible.

How We Can Help You with Tax: 

We work with numerous umbrella companies in the Philippines, many of whom are experts in tax and immigration laws. If you have any questions about tax in the Philippines, we’ll get the answers from them directly so you can rest assured you’ll be getting accurate information. We have comprehensive knowledge of the different services they provide, and can help you find the right company to handle your income tax. We help oil and gas workers, software developers, IT project managers, testers, business analysts and telecommunications contractors get tax efficient payments and sponsorship for their Filipino work permit.

Our advice is 100 percent free, and comes with no obligations. You will be paying taxes in the Philippines but without the overhead of directly dealing with the Filipino tax authorities. Get in touch with us today for some reliable advice on tax in the Philippines!

When Do You Need to Lodge Your Tax Return?: 
15th April
Tax Filing Deadline : 
15th April
Can you file it online? : 
Yes, https://efps.bir.gov.ph/
Currency: 
Philippine Peso (PHP)
Tax-free Threshold in: 
None
Grossed Income: 
0 - 10,000
Tax Rate: 
5%
Grossed Income: 
>10,000 - 30,000
Tax Rate: 
10%
Grossed Income: 
>30,000 - 70,000
Tax Rate: 
15%
Grossed Income: 
>70,000 - 140,000
Tax Rate: 
20%
Grossed Income: 
>140,000 - 250,000
Tax Rate: 
25%
Grossed Income: 
>250,000 - 500,000
Tax Rate: 
30%
Grossed Income: 
>500,000
Tax Rate: 
32%
How long does it take to set up: 
16 days
How much does it cost: 
PHP5,615
Is it easy? : 
Starting a Business Rank: 173/190 (Source: World Bank)
How to File Taxes in: 

You are generally required to file taxes if you are a:

  • Resident citizen receiving income from sources within or outside the Philippines; or
  • Resident alien, non-resident citizen, or ‘non-resident alien engaged in trade or business’, receiving income from sources within the Philippines.

You can file taxes online, or in person.

Online

Step 1: Enrol in eFPS

You can file your taxes online on the the Bureau of Internal Revenue’s e-Filing and Payment System here. Under the ‘login’ button, click on ‘Enroll to eFPS’.

To enrol, you are required to fill in:

  • Your Tax Identification Number (TIN);
  • Your personal details e.g. name, date of birth, address; and
  • Your bank account details with an Authorised Agent Bank (AAB).

Step 2: Fill in Tax Information

Upon successful enrolment, fill out the tax returns fields with the required details, and submit the information.

Step 3: Receive Confirmation

After successful online filing and submission of the tax return, a Filing Reference Number (FRN) page is generated and displayed. Record the Reference No. and click ‘Proceed to Payment’.

Step 4:  Fill in eFPS Payment Form

The eFPS Payment Form is displayed with default payment information retrieved from the e-Filing service. Next to ‘eFPS mode of payment’, select your AAB. Click ‘submit’.

Step 5: Receive Confirmation

Upon successful payment, a confirmation screen will appear, stating that the eFPS has received the payment transaction.

In Person

Step 1: Fill in BIR Form 1700 ‘Annual Income Tax for Individuals Earning Purely Compensation Income (Including Non-Business/Non-Profession Related Income) and Marginal Income Earners’

Print and complete 3 copies of BIR Form 1700. This can be downloaded here.

The following documentation is required:

  • Certificate of Income Tax Withheld on Compensation (BIR Form 2316)
  • Income Tax Return previously filed and proof of payment (if filing an amended return for the same income year)

The following documentation may be required, if applicable:

  • Waiver of the Husband’s right to claim additional exemption
  • Duly approved Tax Debit Memo
  • Proof of Foreign Tax Credits

You may be required to fill in other forms, if you are self-employed, or you receive both business and employment (‘compensation’) income. You can access these forms on the BIR website here.

Step 2: Submit Tax Forms

With Payment

Proceed to the nearest Authorised Agent Bank (AAB) where you are registered. Alternatively, proceed to the Revenue Collection Officer or Authorised City or Municipal Treasurer, located within the Revenue District Office (RDO) where you are registered. Submit your forms with the relevant attachments and payment.

A list of AABs can be found here.

A list of RDOs can be found here.

Receive your copy of the stamped and validated form from the teller of the AAB, Revenue Collection Officer, or Treasurer.

Without Payment

For ‘no payment’ returns, including refundable returns, proceed to the Revenue District Office (RDO) where you are registered or any BIR Tax Filing Centre. Submit your forms with the relevant attachments.

Receive your copy of the stamped and validated form from the RDO or Tax Filing Centre representative.

A list of RDOs can be found here.

Notes: 

Non-residents, not engaged in trade or business in the Philippines, are subject to a flat tax rate of 25% on gross Philippine-sourced income.

Does the 183 day rule apply in: 

No

When do you become a tax resident in: 

You become a ‘resident alien’ when you are a national of another country and you live in the Philippines with no definite intention as to length of stay, but you do not intend to stay temporarily. An expatriate working in the Philippines on a contract for an indefinite period is likely to be a ‘resident alien’.

You become a ‘non-resident alien engaged in trade or business’ if you stay for more than 180 days during any calendar year.

Expatriates contracted in the Philippines for a definite period are generally classified as ‘non-resident aliens engaged in trade or business’. 

Am I taxed on my global income in: 

Resident citizens are taxed on their worldwide income. Resident aliens and non-residents are taxed on their Philippines-sourced income only.

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