List of Territorial Tax Countries with formal and de-facto treatment of foreign income

[JustAnotherNomad]

No, the UAE has 9% corporate tax now, on any kind of income.
There are some exceptions for certain activities (like construction of ships) in freezones, for companies with proper substance (employees, office, ...) - they would still pay 0%.
Alternatively, for the first 3 years, there's no tax if your revenue is below 800k.
The legal situation is still very much "in flux" since they just introduced this tax. I would strongly recommend you to stay away from the UAE.
There is no rule of law. They can change the rules any time and you have no recourse.

RAK offshore companies (IBCs) are worthless. For all I know, you would never ever get a bank account for such a company.
Then you would be better off with a Hong Kong company - at least it's still possible to get a bank account with some EMIs.

I see your points re. US LLCs. Then set up a Canadian LP, a UK LLP or a Hong Kong Ltd.
Then move to Thailand and be happy.
Only downside if you're a trader: No access to treaty benefits if you use such a company and aren't considered tax resident by Thailand.
See also this thread:

Thai tax residency certificate without spending 180+ days in the country?

Is it possible to obtain a Thai tax residency certificate without spending 180+ days in the country, for example if you get a local job and pay some tax?

www.offshorecorptalk.com

 

[Marzio]

Guys i'm going to ask @Martin Everson or @JohnLocke to delete all posts starting from post #55 because i'd really like to keep this thread clean. It was my fault in the first place because i added a list of tax free jurisdictions when i instead i should have started a new thread.

 

[Martin Everson]

Guys i'm going to ask @Martin Everson or @JohnLocke to delete all posts starting from post #55 because i'd really like to keep this thread clean. It was my fault in the first place because i added a list of tax free jurisdictions when i instead i should have started a new thread.

Ok the off topic stuff actually goes a lot further back. I will remove posts going forward that are off topic to make it easier.

So guys and girls please stick to thread topic...thx.

 

[JustAnotherNomad]

Maybe you can move it into a separate thread?

Back to topic: What about Hong Kong? Seems like ordinarily resident = tax resident, and foreign income isn't taxed? How strict is it?

 

[Marzio]

Seems like ordinarily resident = tax resident, and foreign income isn't taxed? How strict is it?

They are becoming stricter about FSI

IRD : Foreign-sourced Income Exemption

Also read what happened to @Mike Forman in HK

 

[JustAnotherNomad]

Ok, HK is out then. I was in HK very recently and spoke to some locals. They said everything had changed since covid, the police used to be very friendly, now they're harassing people for no reason.
Several people I know (Chinese) who used to live in HK have also moved abroad. Just wanted to confirm, thanks.

 

[saintjohnny]

Maybe you can move it into a separate thread?

Back to topic: What about Hong Kong? Seems like ordinarily resident = tax resident, and foreign income isn't taxed? How strict is it?

Have you considered the DR before? If you're from Europe it's closer than HK. And nobody gives a s*** about anything.

 

[backpacker]

investment capital gains are withheld by the brokerage…

Nope!
Read -> Maya Consumer
You are responsble, you have to file a tax declaration on your own, you have to declare - nothing will be witheld.

Unfortunately, your opinion ("believe") is widespread. Many already paid dearly for that "believe".

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Ladies, Gentlemen: Make yourself familiar with local legislation. Do not spread info that makes people believe a developing country is 'Wild West' !

 

[aage]

In the thread "Where to relocate to not pay capital gains tax and live cheap" it was mentioned that some countries "don't tax foreign income" in the context of owning a business registered elsewhere while living in the country that "doesn't tax foreign income", i.e. a territorial tax country.

You can do that in the UK as far as I understand, beside Dubai of course.

 

[Mike Forman]

The correct wording:
"An alien individual, whether a resident or not a resident of the Philippines, is taxable only on income derived from sources within the Philippines "
It can not be much clearer. If you perform work in the Philippines, pay your taxes!

We had that before. Not worth discussing such a point of view.

Whoever that was, he/she is wrong. Check what you wrote just one sentence before!
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Please use the search function. I posted several links to relevant publicly available info regarding this entire topic. I am tired to post the same stuff over and over!

I don't need to search on this topic and we might have different opinions and experiences, although I value your opinion as it seems you also have extensive experience in the Philippines.

If you do some online work at home and nothing is related to or sourced in Philippines and you keep everything out of Philippines you won't pay tax on your foreign income.

To be allowed to work in the Philippines am AEP is required, how would someone obtain a work permit for doing online work for a corporation abroad? Only one residence status can get exemption of requiring a work permit but even with that there is no visa or provision that tackle this situation.

It has been confirmed by immigration supervisor that as long as you don't do any business in Philippines, work here in an office or work with locals you don't need (nor you can obtain) a work permit or pay taxes on this.

I understand you are tired of repeating things and I also don't want to go in a discussions here. Still I would be interested to know which type of visa one should aquire and how one can get an AEP if he/she is not employed in the Philippines by a local corporation? As well how to handle tax filing for a foreigner who stays in Philippines and does remote work for a corporation abroad and does not have a work permit . In my knowledge this is not possible unless you create your own corporation.

Personally I pay taxes in Philippines on my local income because I work with locals, but I got an exemption card from BIR where I don't need an AEP and I don't pay taxes on foreign income.

 

[JackAlabama]

I don't need to search on this topic and we might have different opinions and experiences, although I value your opinion as it seems you also have extensive experience in the Philippines.

If you do some online work at home and nothing is related to or sourced in Philippines and you keep everything out of Philippines you won't pay tax on your foreign income.

To be allowed to work in the Philippines am AEP is required, how would someone obtain a work permit for doing online work for a corporation abroad? Only one residence status can get exemption of requiring a work permit but even with that there is no visa or provision that tackle this situation.

It has been confirmed by immigration supervisor that as long as you don't do any business in Philippines, work here in an office or work with locals you don't need (nor you can obtain) a work permit or pay taxes on this.

I understand you are tired of repeating things and I also don't want to go in a discussions here. Still I would be interested to know which type of visa one should aquire and how one can get an AEP if he/she is not employed in the Philippines by a local corporation? As well how to handle tax filing for a foreigner who stays in Philippines and does remote work for a corporation abroad and does not have a work permit . In my knowledge this is not possible unless you create your own corporation.

Personally I pay taxes in Philippines on my local income because I work with locals, but I got an exemption card from BIR where I don't need an AEP and I don't pay taxes on foreign income.

Exactly, this is how it is.

If someone here is writing "Many already paid dearly for that "believe".", it would be great if such a statement can be enriched with maybe around 10+ semi-official sources for everyone to read and where it has been caused by such and not tax laws has been used because subject had a comprehensive inspection with a local sheriffs daughter.

 

[Marzio]

I don't pay taxes on foreign income.

Is that passive income or active income?

 

[backpacker]

Only one residence status can get exemption of requiring a work permit but even with that there is no visa or provision that tackle this situation.

It is, of course, more than one, even though that's pretty irrelevant in the context of this thread -> WORK PERMIT APPLICATION FOR FOREIGN NATIONALS | DOLE-CAR

Still I would be interested to know which type of visa one should aquire and how one can get an AEP if he/she is not employed in the Philippines by a local corporation?

If the company does not want to create a local establishment, you are self-employed/freelance (even if not).
The point here is that the foreign company is not even allowed to hire you as an employee without acquiring the necesaary pernissions.
Ask DOLE, not an immigration supervisor.
I had that discussion years ago with DOLE. All too complicated, so I did not contunue with what I had in mind.
This automatically answers the tax question.
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Exactly, this is how it is.

Nope. Read again and you will see the problem.

If someone here is writing "Many already paid dearly for that "believe".", it would be great if such a statement can be enriched with maybe around 10+ semi-official sources

Google: BIR, Kim Henares. During her term, cases where highly public.
I posted an offcial source (#68). It clearly mentions what to do.
Sadly, your reply suggests a 'Wild West' approach.

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I suggest to end our little discussion here, and I a saying Good Bye & Farewell.
Everybody who reads it can now make up his/her mind if it's worth to dig a bit deeper into local legislation (and to not confuse developing nations with the 'Wild West' ).

 

[Cloudbanck]

Google: BIR, Kim Henares. During her term, cases where highly public.
I posted an offcial source (#68). It clearly mentions what to do.
Sadly, your reply suggests a 'Wild West' approach.

I read up on Kim Henares, seems she went after grand corruption, government corruption, and tried to reform the tax agency which had a reputation of being among the most corrupt institutions in the Philippines. Tough job in a developing country!

From a Reuters article about her:

Philippine tax sheriff takes aim at cheats to hit target

The Philippines' chief tax collector is constantly thinking about targets. Sometimes she picks up an assault rifle and hits them.

www.reuters.com

---
"Historically, tax collection has sometimes been a “let’s make a deal” game between taxpayers and bribable officials.
We are changing ourselves from being primarily a customer service institution to a law enforcement institution, said Henares. “We were collecting taxes at the pace the taxpayer dictates.

Now, the bureau - which collects nearly 70 percent of all government revenue - is taking the initiative, and it wants taxpayers to be afraid of ignoring laws. “If you look at the psyche of the Filipino, if you do not put fear in them they will not obey,” Henares said.
---
So a clear mission statement about no longer being Wild West, but at the same time a recognition of the reality, that the Philippines really was Wild West - and might still be. Not sure to what degree Ms Henares succeeded. John Githongo tried to clean up things in Kenya in the same way as head of Kenya's anti corruption agency, and was threatened to death, fired and had to flee Kenya. Look him up! Much of the developing world still remains the wild west.

Anyway, I see no examples of Henares going after small time foreigners with a business outside the Philippines. More from Reuters:

---
"She quickly filed her first case, against a pawnshop chain owner who bought a Lamborghini for 26 million pesos during a year in which he and his wife allegedly did not pay tax. The case is pending in a tax-appeal court, with the accused out on bail.

The cases that Henares files at the Department of Justice can lead to arrests, but only a court can convict. To date, only five tax cheats have been convicted.

While Henares may have to wait years to get her first criminal conviction, she has filed 135 evasion cases so far. They include a 120 million peso suit against an impeached Supreme Court chief justice and a 5.5 billion peso claim against a billionaire businessman."
---

So 135 evasion cases, 5 conviction, that's not very much in a country with 114 million people. What would be much more interesting to hear is if there are examples any non-super high profile expats living in Philippines that have been targeted by tax authorities.

 

[Mike Forman]

Below a link describing more about working as a "nomad" in the Philippines. This article shouldn't be interpreted as being a reference but it clearly describes the situation in Philippines. Just as in Thailand, can you get in trouble working remotely for years in Philippines and not paying any tax, maybe yes. But chances are very small as long as you don't work with local corporation, locals and stay out office environments.

Can I Work Remotely in the Philippines? - Careers

Social: Many people dream of living in the Philippines while making a living remotely. In fact, thousands of digital nomads come every year to this tropical paradise to do exactly this! Since the local job... Continue Reading Can I Work Remotely in the Philippines?

www.supportadventure.com

It would be interesting to see an article about a case where foreigner ok Philippines was working remotely on a tourist visa and had to pay taxes or got deported. Most foreigners are in Philippines on a tourist visa and many even own businesses on a tourist visa.

Recently someone who ran a charity business (dog shelter) in Philippines, who has no work permit nor corporation was told that she needed a corporation to run that. The local government helped her to obtain everything and even donated money.

In will also close this topic for myself, and we people can decide for themselves if it's a risk to work remotely in Philippines or not. There is no nomad visa nor a clear rule, so even questions are asked to officials the result will be different answers

Is that passive income or active income?

Both, multiple sources and jurisdictions. I'm also residing in different countries so the situation is more complex and doesn't mean no issues ever can arise. In the past 15 years had paid always personal income tax and contributions on local earned income.

 

[JackAlabama]

I read up on Kim Henares, seems she went after grand corruption, government corruption, and tried to reform the tax agency which had a reputation of being among the most corrupt institutions in the Philippines. Tough job in a developing country!

From a Reuters article about her:

Philippine tax sheriff takes aim at cheats to hit target

The Philippines' chief tax collector is constantly thinking about targets. Sometimes she picks up an assault rifle and hits them.

www.reuters.com

---
"Historically, tax collection has sometimes been a “let’s make a deal” game between taxpayers and bribable officials.
We are changing ourselves from being primarily a customer service institution to a law enforcement institution, said Henares. “We were collecting taxes at the pace the taxpayer dictates.

Now, the bureau - which collects nearly 70 percent of all government revenue - is taking the initiative, and it wants taxpayers to be afraid of ignoring laws. “If you look at the psyche of the Filipino, if you do not put fear in them they will not obey,” Henares said.
---
So a clear mission statement about no longer being Wild West, but at the same time a recognition of the reality, that the Philippines really was Wild West - and might still be. Not sure to what degree Ms Henares succeeded. John Githongo tried to clean up things in Kenya in the same way as head of Kenya's anti corruption agency, and was threatened to death, fired and had to flee Kenya. Look him up! Much of the developing world still remains the wild west.

Anyway, I see no examples of Henares going after small time foreigners with a business outside the Philippines. More from Reuters:

---
"She quickly filed her first case, against a pawnshop chain owner who bought a Lamborghini for 26 million pesos during a year in which he and his wife allegedly did not pay tax. The case is pending in a tax-appeal court, with the accused out on bail.

The cases that Henares files at the Department of Justice can lead to arrests, but only a court can convict. To date, only five tax cheats have been convicted.

While Henares may have to wait years to get her first criminal conviction, she has filed 135 evasion cases so far. They include a 120 million peso suit against an impeached Supreme Court chief justice and a 5.5 billion peso claim against a billionaire businessman."
---

So 135 evasion cases, 5 conviction, that's not very much in a country with 114 million people. What would be much more interesting to hear is if there are examples any non-super high profile expats living in Philippines that have been targeted by tax authorities.

Yes, that is very interesting outcome.
Also wondering if these millions upon millions of Philippine VAs are all paying tax working from home for US etc companies, and these are nationals and not expats.

 

[Mike Forman]

Yes, that is very interesting outcome.
Also wondering if these millions upon millions of Philippine VAs are all paying tax working from home for US etc companies, and these are nationals and not expats.

Quite some Filipino citizens work for a company abroad either as freelancer or employee and don't report their income. I wouldn't recommend that although there is still a bank secrecy in Philippines but this might change soon with the bill 7446 that passed vote in congress. As anywhere in the world trouble starts when due to any event, tax authorities start looking closer at you.

Therefor keep your income outside Philippines and use wise card to pay or to withdraw money. Bitcoin is also accepted in quite some supermarkets and venues.

 

[sergeylim88]

What about Seychelles? Does anyone know?

 

[Jock]

As well how to handle tax filing for a foreigner who stays in Philippines and does remote work for a corporation abroad and does not have a work permit . In my knowledge this is not possible unless you create your own corporation.

In the “Corporation Code” of the PH there is no concept of residence for tax purposes. Instead the PH applies the incorporation test.

As a result, you would be unable to obtain a PH TIN for your overseas company as under the criteria of the PH Government, it is not considered tax resident.

Additionally, the PH does not have a central management and control test.

A corporation is resident if it is incorporated in the PH or, if a foreign corporation, it has a branch licensed by the SEC in the PH. A “Branch Office” of a non-resident foreign corporation must “derive income from the PH” according to the Corporation Code of the PH. The branch is taxed only on nett income from sources within the Philippines.


THEREFORE if the foreign company has no PH income:
* it can not open a branch office
* it is not resident for tax purposes
* it is unable to obtain a PH TIN


Our problem with our foreign minds is that we are mentally predisposed to go into detail to an extent that Filipinos simply don`t. Their law is unclear. One`s predicament therefore all comes down to the interpretation of the enforcing Pinoy and so there is risk. How great a risk?

 

[backpacker]

In the “Corporation Code” of the PH there is no concept of residence for tax purposes. Instead the PH applies the incorporation test.

As a result, you would be unable to obtain a PH TIN for your overseas company as under the criteria of the PH Government, it is not considered tax resident.

Additionally, the PH does not have a central management and control test.

A corporation is resident if it is incorporated in the PH or, if a foreign corporation, it has a branch licensed by the SEC in the PH. A “Branch Office” of a non-resident foreign corporation must “derive income from the PH” according to the Corporation Code of the PH. The branch is taxed only on nett income from sources within the Philippines.


THEREFORE if the foreign company has no PH income:
* it can not open a branch office
* it is not resident for tax purposes
* it is unable to obtain a PH TIN


Our problem with our foreign minds is that we are mentally predisposed to go into detail to an extent that Filipinos simply don`t. Their law is unclear. One`s predicament therefore all comes down to the interpretation of the enforcing Pinoy and so there is risk. How great a risk?

We discussed that already two years ago (related to SEC license). I will link the discussion here so folks can study and make up their own mind ->

Best country for a freelancer / digital nomad post-covid

I had similar situation ( freelancer, moving out of Finland ) and after going through all available options I chose Romania. 6-8% tax is great for freelancer. You also get nice weather, great internet, cheap prices, in Europe (flights), EU VAT etc. No 6 months requirement to be a tax resident...

www.offshorecorptalk.com

(Att.: Do not get confused by the title of the thread. Most of the PH related discussion starts on page 3 with ~ post #42)