A Contractor’s Guide to Taxes in the Philippines
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 in the Philippines?
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. 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 of doing everything themselves.
Do you know much about Filipino Tax Law? Do 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 per cent, and you need to be sure you are placed in the correct tax brackets.
How much is income tax in the Philippines?
Income tax in the Philippines can range from 5 to 32 per cent.
Calculators Tax Rate Philippines
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 in the Philippines
Contractors in the Philippines face 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 in the Philippines
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 appropriate 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 permits.
Our advice is 100 per cent 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 in the Philippines?
When is the tax filing deadline in the Philippines?
Can you file your tax online in the Philippines? :
How long does it take to set up taxes in the Philippines?
How much does it cost?
Is it easy to start a business in the Philippines?
How to File Taxes in the Philippines
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.
How to File Taxes in the Philippines Online
- Enrol in eFPS
- Fill in Tax Information
- Receive Confirmation
- Fill in the eFPS Payment Form
- Receive Confirmation
Step 1: Enrol in eFPS
You can file your taxes online on the Bureau of Internal Revenue’s e-Filing and Payment System here(the link is external). Under the ‘login’ button, click on ‘Enrol 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.
How to File Taxes in the Philippines In-Person
- Fill in BIR Form 1700
- Submit Tax forms
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 an 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 receive both business and employment (‘compensation’) income. You can access these forms on the BIR website here
Step 2: Submit Tax Forms
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.
Receive your copy of the stamped and validated form from the teller of the AAB, Revenue Collection Officer, or Treasurer.
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.
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 the Philippines?
When do you become a tax resident in the Philippines?
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 the 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 the Philippines?
Resident citizens are taxed on their worldwide income. Resident aliens and non-residents are taxed on their Philippines-sourced income only.