When I am writing this I am sitting in an internet cafe. Behind me there is a tourist girl comparing her love life to the 50 shades.
Outside on the terrace there is a family completely dressed up after church. They all look pretty.
Last week I sat down with a Filipino lawyer.
As you would expect, the story went to taxes…
Tax Free Philippines. An Illusion?
The Philippines has territorial taxation. In this case it means that non-resident and resident foreign aliens are only taxed on income generated locally. Citizens are taxed on worldwide income.
In my case I have two sources of income. The first is a salary from foreign sources. This is income NOT generated locally, and NOT taxed.
I also have my own business in the UAE. When this pays out an income, the first idea would be that this is foreign income. But as I explained in Where To Pay Taxes, you also have to look at the facts.
Because when I run the business from here, it means that the company has a permanent establishment here. And someone could argue that my income is (partially) generated locally.
…Still with me?
The lawyer said something along these lines:
“I understand what you are saying, and we do have those laws in place. The laws here are actually quite advanced. No people that understand this and would bother to engage in these discussions with foreigners. But there is not a single mechanism in place. I know of not a single foreigner who had such a discussion about his permanent establishment.”
Did you know? In the Philippines most people pay as little taxes as they feel they can get away with.
The system is to corrupt.
The people are aware that the money confiscated by governments is not well spend (something people in the West are catching up to).
“In my case I don’t get scrutinized a lot.
The people at the tax office do not like to deal with lawyers.”
For me it is not so relevant because I currently do not receive an income from my company.
…But think about it…
Those coming from the West know that every tax buck owed is squeezed out of you. One error in your tax return can have serious consequences.
But in a lot of places the government does not have to ability to enforce tax laws to the dot.
And the often they just go for the low hanging fruit.
But Julius, What Are You Saying?
All I am trying to say is that as long you have foreign sourced income you can live tax free in the Philippines.
So remote workers, freelancers, writers, translators, programers and ALL those that are paid from abroad…
You can live in the Philippines without paying taxes on your income.
And if it makes you feel better, you STILL contribute to the “common good” because you pay VAT, visa fees, tourist tax, yadaa yadaa yadaa.
And yes, life is good here.
Tax Free And Minding His Own Business
Interested in how to become a tax free global citizen?