Taxes for expats in the Philippines

I suppose Cheryl it depends on why you move to the Philippines, while most retire here there are others that come here to derive an income.

The former like myself as a retiree simply suffer government taxes like VAT etc. and if coming from a tax aligned country have no need to pay extra taxes on income/pensions derived from home countries as the home country deals with all that, pay taxes we do in our home country.

Coming here to start a business at any level within this country done legally requires a lot of paperwork as well as requirements that will be very different compared to the individuals home countries norms.

For me not worth the headache but I'm sure you can bankroll your partner and simply sit in the background.

As a retiree I have no tax problems here and reject the brown paper bag philosophy proffered by many to cut corners whether legal or shark businessmen.

As a retiree not running a business I/we simply pay the required taxes as does everyone else, never considered taking advantage of senior citizens discount as those are there for the needy, the SIN tax on grog and cigarettes is part of the price for all.

That's just us and live here we do and enjoy.

Cheers, Steve.

An add on here, I remember complaining to my dad the amount of taxes I was paying 35/40 years ago and while we had our disagreements as a wise man simply said to me, "you make money you pay tax, no tax means no money" and I carried his words all my life like many other words of wisdom that he bequeathed me with, pay more tax equals you are doing ok no matter country or tax regimes and sure we all try to minimise our tax obligations legally but at the end of the day?

I'm sure that relates to all countries including the Philippines.

Cheers, Steve.

it great to know you choose philippines to stay

If you have an income in your home country (e.g. a pension) you need to pay the income tax in the Philippines if you stay in the Philippines for more than 180 days as a permanent resident.

To avoid the double taxation (as you have to pay the income tax in your home country), there are many countries with a double taxation treaty with the Philippines. So you need to fill in BIR Form 902 and give it to the financial authorities here. If there is a double taxation treaty with your home country, you can pay the taxes in the Philippines. In case the tax in your home country was already deducted, you should get it back from the financial authorities in your home country.

This is the theory. I am 2 years away from getting a pension in Austria.

Has anyone experience with double taxation?

Andy from Boracay

For USA expats we have treaty article 18 private pensions and article 19 social security. I see that austrla has a treaty, also called article 18 for private pensions. None if the above articles are taxable in the Philippines but are taxable in the "contracting country". I think your point goes beyond that, ie do we fill pit BIR Form 0902 to inform them of your income and then determine there is no tax due to treaty. My research shows a similar tact, ie, technically you earn money so you apply for a TIN number with a certain form but then determine later that you owe no tax on the pensions. My casual research on the topic says that most of us don't get TINs unless we have businesses here. If all we have is pensions the treaties cover our oreign pensions and social security 100%. I am not sure if, as in the USA, your treaty covers dividends, interest. Austrian cap gains and the like. My wife has a TIN for cap gains buying and selling land plus a Phils SSS pension. The USA treaty is likely so well understood by tax authorities here that forms need not be filled out due to unknown status of any tax treaty. I suspect thevsame is true of all EU UK ANZ AND EEA. Also, form BIR0902 seems to be focused on Philippine citizens, employees of companies overseas, OFWs and the like but you are right, in theory, after 183 days you are a tax resident and there may well be certain foreign earnings other than pensions, that some expats have, that are not protected by tax treaties. As for filling out forms every year for expat permanent residents and SRRV receiving pensions and social security, not required if all you earn are pensions and SSA. But for Austria I might double check because all I saw protected was private pensions.

@Andy_1963

  Has anything changed ? As far as I know PH tax on pensions is 0%

I am afraid that it is not the case. It starts  with 0% and depending how much you get it increases. So, no flat tax of 0% for pensions.

@Andy_1963 Has anything changed ? As far as I know PH tax on pensions is 0% - @emvaningen

I happened to be looking at this along with with US treaty article 18 (same as austria) and it does appear to be zero tax for both of our "contracting" countries but we of course pay our home country tax. For Austria:

"Tax Hub

Tax Treaties

philippines - Austria

Austria - Philippines Tax Treaty (1981) — Orbitax Tax Hub

ARTICLE 18

Pensions

(1) Subject to the provisions of paragraph (2) of Article 19, pensions and other similar remuneration paid to a resident of a Contracting State in consideration of past employment shall be taxable only in that State. However, pensions paid out of Philippine pension plans not registered under Philippine laws may be taxed in the Philippines.

(2) Notwithstanding the provisions of paragraph (1), social security pensions paid by a social security instrumentality of a Contracting State shall be taxable only in that State."

Good answers above, for those who choose to live or retire in PH we are lucky as the taxes are very low if any on income we bring into the country. PH only realises tax those of us who work for a company here and are salaried or those who run businesses.

The rest of us are lucky as at the moment the Philippines has more important economic issues to address other than taxing a few retired expats. In many other countries in Asia this is changing so even in Thailand they now want and are taxing retirees on the pension income they bring into the country.

Not only this but Thailand wants to tax those who are permanently resident there on their worldwide assets and income. This brings it in line with most countries around the world who also tax their citizens on their world wide wealth.

Fair to say that the Philippines is unlikely to do this for some time but in another 10 years or so they will likely also go down this route.

I moved to the Philippines with my eyes wide open and understand all countries need to make money and collect taxes. Life is a game and the key is to understand the rules of the game then you can be happy where you decide to make your bed.

@James Hartland

Welcome to the Forum James

@James Hartland

Fair to say that the Philippines is unlikely to do this for some time but in another 10 years or so they will likely also go down this route.

I moved to the Philippines with my eyes wide open and understand all countries need to make money and collect taxes. Life is a game and the key is to understand the rules of the game then you can be happy where you decide to make your bed.

Interesting that you say that in 10 years the Philippines is "likely" to tax expats as if you have some insight on the subject. The treaty that the USA has with the Philippines is much different than our treaty with Thailand whi is not an ally  For both countries, pensions are handled as passive income and treated differently than active earnings but clearly, with the Philippines the tax on pensions is zero and I didn't wade through the complexities to determine the current Thai tax on pensions. What is it that makes you think the USA is ready to make a new treaty to disadvantage it's expat citizens? The Philippines would "demand" a change from its ally? My gut feeling is no, they would never do that but I have zero practical insight on the matter. Thailand is a much different situation, politically, so I think. But my eyes are open too and my whole FIL AM experience tells me that anything is possible.  But double taxation? Not likely, to me.

Welcome to the forum James Hartland, enjoy.

I would agree with danfinn, tax aligned affiliations with other countries or tax treaties means no double dipping.

We spend at least P 1.5 to 2 M pesos every year here in PH. and simply look at the VAT, well over 100K into the tax system, we don't tax our full time employee as he earns less than P 250K per year and not not taxable. The old saying money is made round to go around and we certainly do our bit.

Cheers, Steve.

@bigpearl

Thanks Steve. So Australia has one of these tax treaties with the Philippines? So if you pay tax on income in Australia or it's tax free in Australia (e.g.  super after 60) then no tax is payable in Philippines? Cheerio

Yes Brojeslov, Oz has a tax treaty with the Philippines as do some 44 other countries. Any income derived and taxed in Oz is not subject to taxation here even on funds sent into the country.

Not sure if you are aware but a little over a year ago I rolled my super account into a pension fund and draw the minimum 4% as I found out a couple of years ago if I did this I never pay any taxes on the income generated by my fund, @ 15%, that alone saved me well over AU 20K per year and sits in the fund and not the government coffers.

I paid my taxes in Oz for 45 years and when I looked into a pension which is now at now 67 I never qualified as I apparently worked too hard and have too much money, typical lies and hypocrisy. Very glad I don't need the pittance payment.

Good Luck.

Cheers, Steve.

@bigpearl

Your minimum super draw down increases with age but you can open an accumulation account and deposit your draw down, up to a generous limit, while claiming it as a tax deduction against any taxable income you may have outside of super - one of the last great lurks of our super system. If you still have taxable income in Australia you should look into it.

Thanks for the clarification on Philippines taxation. I am retiring to the Philippines shortly and have mainly private income earned in Australia, so I shouldn't have any income tax obligations in the Philippines.

Yes Brojeslov, aware of that but my taxable income in Oz is under the tax free threshold of 18.2K and will keep it that way as well as my super is tax free.

What is interesting is I rolled over to a pension account when I was 64 and yes it was 4% but now at 65 it should be 5% but is still at 4%, next month I turn 66 so will see what happens then. in the mean time we enjoy the benefits and the spare cash means more holidays.

An add on Bro is that superannuation averages a 8 to 10% growth annually and drawing say 5% as a pension and throw in CPI increases one is still in front and not eroding the principal in a tax free scenario. My super continues to grow as does yours, yes there are some bad years but ride the waves and you will always be in front with a decent fund.

Cheers, Steve.

@bigpearl

I'm not 60 yet but my ex wife who is contributes $25K to her accumulation fund, claims the $25K as a tax deduction against her private income, then withdraws the $25K, for an easy $4K profit that pays for her sparkling wine. It's the last lurk *alas* but you need to be over 60 and have taxable income.

I've been a frequent visitor to the Philippines since just before COVID and as of next month am flipping things around to become a frequent visitor to Australia. I'm very much a beneficiary of this forum. Thanks for all the info

Are you still legally meant to get a Philippine TIN after 183 days and are a tax resident? Even if you don’t have to file a tax return?

I was wondering if you would need a TIN for a bank account as well.