There are an estimated 105,000 Americans living in the Philippines.
Living in the Philippines is an incredible experience for a variety of reasons – the climate, the people, the food, the culture, and the beaches, to name but a few. As an American expatriate living in the Philippines though, what exactly do you need to know regarding filing US expat (and Filipino) taxes?
The good news is if you are already paying income tax in the Philippines, there are various exclusions and exemptions available to prevent you paying tax on the same income to the IRS too.
US taxes – what you need to know
If you earn north of US$10,000 (or $400 for self-employed individuals), you must file form 1040. While taxes owed are still payable by April 15th, expats get an automatic filing extension until June 15th. This can be extended still further online until October 15th.
If you have foreign assets worth more than US$200,000 (per person), excluding your home if it is owned in your own name, you should also file a form 8938 declaring them.
“Resident citizens are taxed on all of their income, while foreign residents and non residents are only taxed on their Filipino income.”
- Santander Rio Bank
If you had over US$10,000 in total in one or more foreign financial accounts at any time during the tax year, you must also file FinCEN form 114, otherwise known as an FBAR (Foreign Bank Account Report).
The US and Filipino governments share taxpayer info, and Filipino banks pass on US account holders' account info to the IRS, so it's not worth being economical with the truth or hoping to stay below the IRS' radar. The fines for tax evasion (or incomplete filing or not filing) for expats are high to say the least.
If you're a US citizen, green card holder, or dual citizen and you have lived in the Philippines for some time but didn't know you had to file or US taxes, don't fear: there's a program called the IRS Streamlined Procedure that allows you to catch up on your filing without facing any penalties. It's better to do this soon though, before the IRS comes looking for you.
Filipino tax returns are due by April 15th, the same as for Americans who live in the US. The Filipino equivalent of the IRS is called the BIR (Bureau of Internal Revenue), and the Filipino tax return form is called BIR Form 1700, or BIR form 1701 if you're self-employed.
Filipino income tax rates are relatively high compared to the US, so for many people it will make sense to claim the Foreign Tax Credit. You can find information on Filipino income tax rates here.
We strongly recommend that if you have any doubts or questions about your tax filing situation as a US expat living in the Philippines, that you contact an expat tax specialist.