Are OFW’s Really Not Required to File Income Tax Returns?

April 15 has always been headache for me from my years of being a slave junior auditor in Deloitte up to the years burning my seat as an accounting & finance professional in various companies. The BIR (Bureau of Internal Revenue) and this horrendous date of the year have brought me either nightmares or sleepless nights. You should know what I mean.

Thank God I am now an OFW! I have somehow been freed from this April 15 curse. But am I really exempted from all these annual tax filing commotions?

The Revenue Regulation No. 1-2011 issued by the BIR defines that OFWs are exempt from paying income taxes for income earned abroad. However, the burden of proof is on the OFW’s themselves as they must show proof that they are registered as OCWs (overseas contract workers) or OFW’s with the Philippine Overseas Employment Administration (POEA) and have a valid Overseas Employment Certificate (OEC).

So fellow OFWs, don’t lose those OEC’s!

How About My Income Sourced from the Philippines?

I still earn as a blogger, online marketer, writer, and affiliate partner of various entities based in the Philippines. These income and earnings are considered taxable and have to be reported to the BIR.

The regulation defines that in spite of the exemption of OFW’s/non-resident Filipinos from Philippine taxes for foreign-sourced income, they are not exempted from paying taxes for their income derived back home.

So with that saying, if you are an OFW and running a business in the Philippines or are being paid for consultancy services for clients in the Philippines even if done online while you are abroad, you can never get away from the eyes of the BIR.

Income from sources within the Philippines should be filed in either Form 1700 or Form 1701.

You still have to file your foreign-sourced income information using the BIR Form 1703.

1703


Stricter Monitoring of Remittances

The BIR issued recently the Revenue Regulation 11-2012 which reiterates that remittances sent by overseas Filipino workers are exempt from documentary stamp tax but requires stricter monitoring of remittances sent through banks and non-bank agents as the BIR stressed that recipients must show proof that the money really came from (OFWs).

The BIR also requires local banks and non-bank money transfer agents to document remittances made by OFWs for monitoring purposes. The banks and non-bank agents must report to the BIR Revenue District Office or Audit Division under the Large Taxpayers Service on a quarterly basis the proof of entitlement submitted by the recipient or the OFW.

We still do not know what will be the concrete actions of the BIR with regards to this revenue regulation so better keep all your remittance slips for possible reconciliation soon with your beneficiaries and your bank in the Philippines.

**Do you need assistance in filing your tax returns? Is your business in dire need of accountant? You can outsource the services of G&C Financials and save money! Email gcfinancialsph@gmail.com for details.

Should I Report my Dividends or Gains from Sale of Stocks in my ITR?

For those investing in the stock market through a Philippine stockbroker, you do not have to reflect your gains/losses from the sale of your shares in your income tax return . Your stockbroker as a “withholding agent” already remits and reports these taxes to the BIR.

The same goes with the dividends that you receive from your favorite companies coursed through your stockbroker. The 10% withholding tax in your dividends is remitted and reported by your stockbroker (withholding agent) so you need not report this anymore as well in your income tax return.

So as an OFW, Should I Really Need to File an Annual ITR or Not?

The truth is, this requirement for OFW’s is not really clear even for BIR employees. Some BIR officials even have conflicting interpretations on regulations and circulars related to ITR filing for OFW’s.

But regardless if you are required or not, it is still best that you file your annual ITR since this may benefit you in the near future.

If you are going to open a new business in the Philippines while being an OFW, you will be required to present an ITR. If you will be applying for a bank loan, the bank will likewise ask you to submit a copy of the same.

Be a good, brave tax-paying citizen just like our courageous soldiers we are honoring today by filing your income tax return, even if you think that the government is not performing its duties for the country.

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**Do you need assistance in filing your tax returns? Is your business in dire need of accountant? You can outsource the services of G&C Financials and save money! Email gcfinancialsph@gmail.com for details.

 

5 thoughts on “Are OFW’s Really Not Required to File Income Tax Returns?”

  1. My husband is an OFW, a seafarer and I am private Medical Practitioner. In filing my ITR, I am claiming additional exemptions for our 2 children. Do I need to submit a waiver of my husband who is exempted from filing ITR? In the waiver form it is stated that both are jointly filing the ITR which is not applicable to me.

    1. Hi Ma’am Josephine..
      I am in the same situation..I am working here at the Philippines while my husband is an OFW.
      What did you do?
      Thank you.

  2. Hi! Would you suggest that a freelancer with regular gigs keep his tax payments and invest them first until the filing of income tax? For example, a certain self-employed writer earns 10k and his tax per month is 2k. Would you recommend na ipunin yung 2k/month na tax at i-invest muna para palaguin before ibayad sa BIR? Thanks!!! :)

  3. What if a Filipino citizen is outsourced by a company which based in another country? This is not a freelance job but an employment contract for a year. It is like an employer-employee relationship except that the employer is in another country while the employee is in the Philippines.

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