Like any other citizen in the Philippines, Overseas Filipino Workers (OFW) are required to pay taxes as they are not exempted though they are not residing in the Philippines.
It is just important for OFWs to know the taxes that they have to pay and its proceeds. The Bureau of Internal Revenue (BIR) has reiterated the tax treatment for money remittances and income earnings of OFWs according to Revenue Regulation No. 1-2011.
Are OFWs obligated to pay income taxes?
According to the Philippine taxation law, “All Filipinos are to be taxed based on the taxable income derived within and outside the Philippines”, therefore, regardless of the location and the source, all income of all Filipino citizens are taxable.
However, as stated by the reiterated Revenue Memorandum No.1-2011, the salary of OFWs “arising out of his overseas employment is exempt from income tax.” Since OFWs are already being taxed in the country where they are working, therefore, their income will no longer be taxed as per the virtue of Tax Reciprocity.
However, the business properties and activities of OFWs in the Philippines are still taxable. Here is the list of taxes that OFWs need to pay for their income within the Philippines.
- 5% – 32% : Regular income received within the Philippines
- 20% Final Tax: interest income from bank deposits and trust funds or any similar arrangements
- 5% – 12% – 20% final tax: interest income from long-term deposits as well as investment, individual trust funds, deposit substitutes, and other investment management accounts
- 10% Final Tax: Royalties received on books, literary works and musical composition
- 20% Final Tax: Other Royalties
- 5% – 32% : Prizes and winnings reaching PhP10,000 or less
- 20% Final Tax: Other prizes and winnings
- 10% Final Tax: Cash or Property Dividends
- 6% Final Tax: Capital gains from the sale, exchange, disposition of real property in the Philippines
Most importantly, OFWs are exempted from travel tax, documentary stamp taxes (DST) and airport fees. OFWs can avail of the DST exemption by presenting any of the following Overseas Employment Certificate (OEC), membership certificate from Overseas Workers Welfare Administration (OWWA), or the electronic receipt issued by POEA.