# No tax on foreign income?



## stolpioni (Jan 25, 2014)

I am moving abroad due to tax purposes and one country I have my eyes on is the Philippines.

Stayed there for a couple of months about 2-3 years ago and although I can't say I love it,
it ain't too bad either.

Now, I have heard that as a foreign resident, you don't pay any taxes on income that you've earned abroad. Is this true?

The second question I have is this:

Lets say I rent a cheap apartment in some cheap area like Tondo, Manila. After I get my residency I leave the country and move to Thailand. Will the government care that I don't really live in the Philippines or will they be OK with me just renting an apartment? (I was planning on renting it for 1-2 years ahead.)

Thing is, I really don't want to live in the Philippines full time.


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## Phil_expat (Jan 3, 2011)

Here is my two cents; I pay no Philippine tax on income I earn in the USA. Are you asking if the government care if you rent an apartment and not be in the Philippines? If that is your question, no, they do not care. Philippines is a small country but not that small! There are a lot of other areas you can live that is better than Manila! Subic is one choice and still near Manila airport. If you stay in Thailand for an extended time it may be better to rent a furnish apartment when you are in the Philippines.


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## jon1 (Mar 18, 2012)

If you are not going to be in the Phil for more than a year straight, I would not even bother with a residency. Residency is not a requirement to rent or lease. Other than the landlord, nobody cares whether you live in the apartment for 1 day or 365. 

I agree with PhilExpat. Look elsewhere to rent. Forget Manila. Tondo is probably the worst place to even consider in the whole city of Manila.

Look into your tax laws as to the requirements for leveraging the overseas incentives. For a U.S. citizen, it doesn't matter if they are on a work or tourist visa. The only one who cares about that status is the foreign country. They just have to work overseas for a minimum of 330 days per tax year to take advantage of the overseas incentives.


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## Gary D (Oct 28, 2013)

Aren't there laws that govern residency. Residency is based on where you live not where you have a house. If you will be spending your time in Thailand it will be Thai rules that apply.


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## stolpioni (Jan 25, 2014)

Thanks for the replies guys.

I think I need to clarify a little bit though: The reason I need to be an official "resident" in the Philippines is because of the tax purposes.

If I become a resident in Thailand, I'd have to pay Thai tax. If I'm a resident in Sweden (even though I live overseas), I'll have to pay Swedish tax.

So the reason I picked Tondo was because the rent is cheap. I'm not actually going to live there. I just want it to look like I'm living there, on paper.

Do you think this would work?


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## Gary D (Oct 28, 2013)

stolpioni said:


> Thanks for the replies guys.
> 
> I think I need to clarify a little bit though: The reason I need to be an official "resident" in the Philippines is because of the tax purposes.
> 
> ...


As far as I'm aware it is not the case that there is not income tax in the Philippines. Talking to retired expats will give you the wrong impression. Retirement pensions are tax at 0%, normal income derived in the Philippines is taxed.


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## 197649 (Jan 1, 2013)

Maybe I don't understand the question. Are you working for an American company? If so you MUST be outside the country for at least 330 days. Doesn't say you must a resident. Last year I believe it was 82,000$ or less you don't pay taxes. Now check the number as it changes every year, if you work for a foreign company I cannot speak intelligently there. I worked outside the US for a US company for 11 years. You can deduct housing, auto, food lot of deductionss. But last I read the IRS is changing the rules so the fat contractors pay more money.


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## jon1 (Mar 18, 2012)

stolpioni,

If you have a 13A residency visa, you would not be allowed to work in the Phil. That would require a 9A or 13G Visa. If you are working in the Phil, you may be subject to the Philippine Income Tax (30%). If you get a 13A residency visa to live on while you are not working elsewhere (i.e. oil rig or ship), then that might meet your Swedish Tax Exemption requirements. You will have to check on the rules that Sweden has implemented. 

C_Acton,

The Foreign Earned Income Credit has gone quite up from what it used to be. This tax year (2013) it's $97600. Foreign Earned Income Exclusion - Requirements What has changed is the tax rate for all $ earned above that. For example;

If you earned $125,000 abroad and with FEIC and deductions, you had say $20,000 taxable income, you would still have to pay taxes at the tax bracket that the $125,000 is in (I believe 25 or 28%) not the bracket that $20,000 is in. So your tax liability would be $5000-$5600. Also, you pay Social Security (6.2%) and Medicare (1.45%) up to $117,000 for 2014. All $ earned above $117,000 has Medicare only taken out.


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## 197649 (Jan 1, 2013)

jon1 said:


> stolpioni,
> 
> If you have a 13A residency visa, you would not be allowed to work in the Phil. That would require a 9A or 13G Visa. If you are working in the Phil, you may be subject to the Philippine Income Tax (30%). If you get a 13A residency visa to live on while you are not working elsewhere (i.e. oil rig or ship), then that might meet your Swedish Tax Exemption requirements. You will have to check on the rules that Sweden has implemented.
> 
> ...


Jon WOW have not paid attention since I am no longer in the FEI bracket that is a big jump. Been ignoring most the tax crap since I only earn 13,000 for retirement but I knew the IRS was planning on getting more money back and you explained how they are doing that. This works hand in hand with what JetLag was talking about in another thread Big Brother


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## jon1 (Mar 18, 2012)

Yes they changed the rules on the tax rates around 2006 I believe (just before I started to work overseas, bad timing). They keep raising the Social Security maximum taxable amount by 3% every year. They have to fund Social Security better somehow as the US Govt is borrowing against it for other budget stuff (been doing this for a Long time already). 

Along with the reporting of foreign bank accounts. Eventually it's going to be very hard for us to find anyone to do our banking with outside of the US as the IRS requirements are going to drive them away.


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## Gary D (Oct 28, 2013)

The OP is Swedish so US rules don't apply. Any income you derive in the Philippines is subject to Philippine income tax. I'm not certain but I don't think the Philippines taxes you on your worldwide income like the US and many EU countries. So if you live in the Philippines any money you earn outside the Philippines is only subject to taxation in the country where you earn it. But can you live in the Philippines and work outside at the same time?


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## jon1 (Mar 18, 2012)

You can live in the Philippines and work abroad. OFWs do it all the time. OFWs do not pay Philippine Income Tax on their overseas earnings. I do not know if they have to pay local taxes where they are working or not.

Now if you became a Philippine citizen and then worked abroad I would think that you would fall into that category. But it is extremely difficult to accomplish that (getting Philippine Citizenship). Residency does not constitute citizenship.

I have set up my household in the Philippines and work abroad. As a US Citizen, I still have to pay US Income tax and would also have to pay State Income Tax (if my home state has that, I have Florida as my home state and they do not have State Income Tax).

I know of several Expats (British, Aussie, Belgian) that are doing something similar to myself. I think that the Brits have a tax advantage for living abroad vs. in the UK. I do not know how their taxation works but do know that they are not paying Philippine Income Tax.

Also, as a US Citizen, if you retire overseas, you are not eligible for the FEIC as your retirement pay (401K, pension, etc.) is generated in the U.S.


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## Gary D (Oct 28, 2013)

jon1 said:


> You can live in the Philippines and work abroad. OFWs do it all the time. OFWs do not pay Philippine Income Tax on their overseas earnings. I do not know if they have to pay local taxes where they are working or not.
> 
> Now if you became a Philippine citizen and then worked abroad I would think that you would fall into that category. But it is extremely difficult to accomplish that (getting Philippine Citizenship). Residency does not constitute citizenship.
> 
> ...


The problem the OP has is that he is trying to avoid paying tax on his worldwide income to the Swedish government. To acheive this the OP needs to become a non-dom by taking up a foriegn residency. The OP wishes to/is working in Thailand. The OP also wishes to avoid paying tax to the Thai government by becoming a Philippine resident because he has been misinformed that there is no tax in the Philippines, this is only true if you are retired. In the UK you can elect to pay your tax either to the UK government as worldwide taxation or to the Philippine goverment, you choose which is the lesser. The advantage of being retired in the Philippines is that you can elect to have your state pension paid in the Philippines at 0% tax and then retain your approx £10,000 UK tax free allowence to use against any UK earnings, say a UK private pension, income from house rental etc.


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## stolpioni (Jan 25, 2014)

Thanks again for the replies everyone.

Just to clarify:

I am not a US citizen or resident and therefore would not be eligible to pay any tax in the US whatsoever.

I am going to enter (and become a resident) in the Philippines by obtaining a SERV (Investor Visa).
I make no money whatsoever in the Philippines or from any Filipinos. I run an e-commerce website and I sell to Europeans.

Would I still need to pay tax in Philippines?

By the way, I spoke to a Filipino attorney a while back and he said that the Philippines only tax territorial income
(which would mean that only income derived within the Philippines would be subject to taxation).


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## Asian Spirit (Mar 1, 2010)

*Dangerous Living.*



stolpioni said:


> Thanks for the replies guys.
> 
> I think I need to clarify a little bit though: The reason I need to be an official "resident" in the Philippines is because of the tax purposes.
> 
> ...


Just a quick note here and this thread will be closed:

If you have actually been to the Philippines in the past-it certainly was not in Tondo. Moving to Tondo or any place like unto it, you will not live long enough to make the first trip to your bank. Better do more research on a better place to live :closed_2:


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