They say the government’s taxing power starts from the moment you were born up until you die (and beyond). That’s true. After all, the citizens of a particular country are required to contribute proportionate amounts so that the government can provide necessary services to its citizens to improve the quality of life.
What if you are working overseas? Are you still required to pay income tax in the Philippines?
Here’s what we know.
First, who is an Overseas Filipino Worker?
OFW is a Filipino citizen employed outside the Philippines where physical presence is required to be able to perform work in the country of deployment. Take note that your foreign employer pays your wages, salaries, and other benefits, and not the agency who facilitated your deployment.
You must be registered with the POEA to be an officially recognized OFW. Nonetheless, your basic rights as a Filipino citizen remains even if you are working abroad.
What’s the rule on OFW’s salaries?
Under the Philippine Tax Code, all Filipinos will be taxed based on the income derived within and outside the Philippines. This means wherever you go, everything you earned is taxable because you are a Filipino citizen.
Don’t panic yet. There is a principle called Tax Reciprocity which exempts you from paying income tax in the Philippines.
Under the Tax Reciprocity rule, Filipinos working abroad are exempt from paying taxes in the Philippines since your income is already being taxed in the country where you are working. Similarly, foreign individuals working in the Philippines will no longer have to pay for taxes in their home country since they are already paying taxes here.
Aside from income abroad, the following also entitles tax exemption for OFWs:
- Airport fee
- Travel tax
- Documentary stamp tax imposed on remittances. To avail of DST tax exemption, the OFW must submit Overseas Employment Certificate (OEC), valid membership certificate from OWWA, and electronic receipt issued by the POEA prior to remittance transaction.
Does this mean Overseas Filipino Workers will no longer pay taxes in the Philippines?
That depends. For income alone, you don’t need to file an income tax return. BUT if you are receiving income from sources within the Philippines, then those income sources are subject to income tax and must be paid to avoid tax evasion case filed against you.
This includes but not limited to:
- Income derived from business
- Rental of property
- Earnings from investment
Still, it is hard to escape the government’s taxing power. Wherever you go, whatever you do, the government will always find a way to impose tax on you.