Philippine tax returns of expat employees

Philippine tax returns of expat employees

As the end of 2008 approaches, corporate and individual taxpayers start to review transactions and records for the preparation of their annual income tax returns. Similarly, this is the best time for expatriates deriving income from Philippine sources to review their tax position and to assess if there is a need for them to file their individual income tax returns and pay taxes to the Philippine Bureau of Internal Revenue (BIR).

In general, expatriates receiving income for services performed in the Philippines, either as an employee or a consultant, are liable to pay Philippine income tax. This applies even if they are being paid by a non-resident employer or client.

The tax return must be filed on or before April 15 of the following year, which for 2008 income will be on April 15, 2009.  There are only a few excluded from this requirement: foreign nationals whose income are exempt from Philippine income tax under existing tax laws or pursuant to the provisions of the tax treaty existing between their country of residence and the Philippines; those whose income are subjected to final tax; and those considered resident aliens receiving purely compensation income—fully subjected to withholding tax—from a single employer in the Philippines.

In most cases, expatriates seek the assistance of their local employers/clients in understanding and complying with their Philippine tax obligations. This process entails the following activities:

• Identification of the expatriate’s tax status
• Computation of his Philippine income tax liability
• Preparation and filing of his Philippine income tax return
• Assistance in securing his Philippine Taxpayer Identification Number (TIN) and, if required, updating his tax registration
• Determination of his community tax liability and securing his community tax certificate (CTC)
• Assistance in securing from the BIR the proof of compliance with local tax filing requirement if needed in connection with the renewal of his registration with the Bureau of Immigration or for his home country tax purposes
• Identification of tax planning opportunities
• Review of the tax protection policies of the company

P&A’s Expatriate Tax Team can support you and your company in addressing these challenges. Feel free to contact our Tax Partner, Marivic Españo at tel. no. 886-5511 loc. 510, or either of our specialist managers: Shirley Go at loc. 537, or Clarissa Hornilla, at loc. 525.