Rep. Joey Salceda of Albay asked the Bureau of Internal Revenue (BIR) to study how to apply Philippine tax rates on income earned by Filipinos working for US clients.
“Filipinos working remotely for US clients, including YouTube influencers and Amazon virtual assistants, are taxed with the Federal Withholding Tax for Foreign Nationals, at a rate of 30 percent. That’s much higher than the Philippine Final Withholding Tax, which is a maximum of 20 percent,” Salceda said.
“That means, we could be saving these workers as much as a month’s worth of salaries – just like the Personal Income Tax cut under TRAIN,” Salceda added.
“I have been campaigning all around Bicol, and 20-30-year-olds are engaged in freelance work with foreign clients. One of them showed me an invoice for their services, and indeed the US deducts a 30 percent withholding tax because their clients fear the IRS,” he said.
Salceda then requested the BIR to study which tax rate would be best to apply, as he believes “that we are probably even able to apply a rate lower than 20 percent. Perhaps the PIT rates, where deductions can apply.”
In most cases, a foreign national is subject to federal withholding tax on US source income at a standard flat rate of 30 percent. A reduced rate, including exemption, may apply if there is a tax treaty between the foreign national’s country of residence and the United States. The tax is generally withheld from the payment made to the foreign national.
Salceda cited that “According to the US Internal Revenue Service, if a foreign national qualifies for an exemption because of a tax treaty benefit, little or no withholding will be taken from a payment. The foreign national must have a U.S. tax identification number in order to claim the benefit.”
Salceda adds that “the next Finance Secretary will also have to pursue these tax treaties. The current SOF has pursued a number. A lot of Filipinos are either OFWs or freelancers working for foreign clients. If we can tax their income here instead of abroad, that would be a good revenue stream without raising new taxes.”