Philippines–USA Tax Rules for New U.S. Green Card Holders With Assets in the Philippines

This article is for general information in a Philippine context. It is not legal or tax advice. Consult U.S. and Philippine advisers for your specific facts.

1) Residency Triggers and Why They Matter

U.S. tax residency

Green Card Test. From the date you become a lawful permanent resident (LPR), you are a U.S. tax resident and generally taxed on worldwide income, no matter where you live.
Substantial Presence Test (SPT). Even before/without a green card, days physically present in the U.S. can make you a resident. Once you have a green card, the SPT is usually irrelevant.
Dual-status year. The year you first obtain the green card is often a dual-status year (part nonresident, part resident). You may instead elect full-year residency (IRC §6013(g)/(h)) if married, to file jointly and take the standard deduction; this requires reporting worldwide income for the full year.
Treaty “nonresident” claim. You may invoke the U.S.–Philippines income tax treaty’s tie-breaker to be treated as nonresident of the U.S. for income tax, but (i) you must disclose on Form 8833, (ii) you cannot use the closer-connection exception as a green card holder, and (iii) long-term LPRs who claim treaty nonresidency can trigger expatriation status and possible exit tax rules (not usually relevant to brand-new LPRs but important later).

Philippine tax residency (for Filipino citizens)

Resident citizens are taxed by the Philippines on worldwide income.
Nonresident citizens (e.g., those who depart to reside/work abroad with established intent) and resident/nonresident aliens are taxed only on Philippine-source income.
Classification affects Philippine tax on your rental income, dividends, and capital gains from Philippine assets after you move to the U.S.

Takeaway: A new LPR can be simultaneously (i) a U.S. resident (worldwide tax) and (ii) a nonresident citizen of the Philippines (Philippine-source only), reducing double taxation when combined with treaty relief and foreign tax credits.

2) What Income Is Taxed Where?

U.S. (as a green card holder)

Worldwide income is reportable: Philippine salaries/consulting fees, business profits, rents, interest, dividends, capital gains (including on Philippine shares/real property), and crypto.
Sourcing rules matter for credits: e.g., rent from Philippine property is foreign-source; interest is generally sourced to the payer’s residence; gains on real property are sourced to the property’s location (Philippines).

Philippines

Philippine-source income is taxable (e.g., rents from a Makati condo, dividends from a Philippine company, gains on Philippine real property, royalties for IP exploited in PH).
Some items are subject to final withholding (rates vary by income type and treaty claims).
Capital gains tax applies to sales of shares in non-public Philippine corporations and to sales of Philippine real property (with special regimes separate from regular graduated rates).

3) Coordination Tools to Prevent Double Tax

Foreign Tax Credit (FTC) – U.S. Form 1116

U.S. residents can claim credits for Philippine income taxes paid on the same income.
Credits are limited by basket (general vs. passive), foreign-source taxable income, and carryover rules.
Track taxes paid vs. accrued, keep official receipts, and convert amounts using IRS-accepted FX rates (spot or annual average, used consistently).

Treaty relief (income tax)

The U.S.–Philippines income tax treaty can reduce Philippine withholding on dividends/interest/royalties and provides tie-breaker residence rules and permanent establishment standards for business profits.
Treaty benefits are not automatic: you must satisfy limitation on benefits (LOB) and local procedures (e.g., Philippine tax relief application, certificates of residence).

Foreign Earned Income Exclusion (FEIE) – Form 2555

Available to U.S. tax residents who meet bona fide residence or physical presence tests outside the U.S. Salary/wages from services performed abroad may be excludable (housing benefits too).
Caveats: FEIE does not apply to passive income (rents, dividends, interest), and using FEIE can reduce the foreign tax credit available on the same income.

4) Reporting & Compliance (U.S.) for Philippine Assets

These are in addition to reporting income on Form 1040.

FBAR (FinCEN 114). File if the aggregate value of foreign financial accounts (PH bank, time deposits, brokerage, e-wallets meeting the definition) exceeds $10,000 at any time in the year. Due April 15 with an automatic extension to October 15. No tax, but penalties are severe.
FATCA – Form 8938. Report specified foreign financial assets (accounts plus certain foreign securities, interests in foreign entities, debt owed to you) if totals exceed thresholds (e.g., for U.S. residents: $50k at year-end or $75k during the year for single; $100k/$150k married filing jointly; higher thresholds if you live abroad). Does not replace FBAR.
Form 8621 (PFIC). Many Philippine mutual funds/UITFs are PFICs. Absent a QEF or MTM election, excess distribution rules apply (punitive). Each PFIC typically requires its own 8621.
Form 5471 (CFC) / 8865 / 8858.
- Corporations (5471): If you own or acquire significant interests in a Philippine corporation, especially where U.S. shareholders (≥10%) collectively own >50% (a CFC), you may face Subpart F/GILTI inclusions. Consider §962 elections and high-tax exclusions.
- Partnerships (8865) and foreign disregarded entities (8858) have analogous reporting.
Forms 3520/3520-A. Required for certain foreign trusts, and for receiving > $100,000 in gifts or inheritances from non-U.S. persons in a year. (Common triggers: Philippine family trusts, property settlements, or large parental gifts.)
Form 926. Transfers of property (cash, IP, equipment) to a foreign corporation can require reporting.
Form 8833. Required if you take a treaty position (e.g., claiming Philippines as treaty residence to override domestic rules).
Real estate depreciation. For Philippine rental property, U.S. depreciation uses ADS; for residential rental, that’s generally a 30-year recovery period (not the 27.5-year U.S. GDS period). Keep cost basis and improvement records in USD.

5) Common Philippine Asset Types & U.S./PH Treatment

Philippine bank deposits

U.S.: Interest is taxable annually; report balances for FBAR/8938.
PH: Final tax may apply to resident depositors; classification as nonresident citizen affects treatment and available treaty rates.

Philippine brokerage / UITFs / mutual funds

U.S.: Likely PFIC—expect Form 8621; dividends and redemptions may be disadvantaged without elections.
PH: Local withholding/final taxes apply; obtain BIR documents to support U.S. credits.

Shares in Philippine corporations (private or listed)

U.S.: Dividends taxable; capital gains/losses on sale; Form 5471 possible if control/thresholds met; watch GILTI/Subpart F if you run operating businesses in PH.
PH: Sales of unlisted shares subject to capital gains tax; listed shares typically subject to stock transaction tax.

Philippine real property (condo/land/house)

U.S.:
- Rental income taxable; expenses (including ADS depreciation) deductible; passive activity loss rules apply.
- Sale: U.S. capital gain recognized; Foreign tax credit for Philippine taxes on the sale.
PH: Gains on sale taxed under capital gains or ordinary rules depending on property type/use; documentary stamp and local transfer taxes apply; withholding on sale by nonresident sellers.

Family corporations, partnerships, and trusts

U.S.: Ownership may trigger 5471/8865/8858/3520 and complex anti-deferral rules (CFC, PFIC).
Planning: Formalize ownership, keep board minutes, capitalization records, and arm’s-length intercompany arrangements.

6) Filing Deadlines & Practical Logistics

U.S. Form 1040: Due April 15 (automatic to June 15 if you live outside the U.S. on April 15; extension to October 15 available; further extension possible for certain expats).
FBAR: April 15 with automatic extension to October 15.
Philippine returns: Follow BIR deadlines (annual income tax by April 15 for individuals; quarterly for businesses; specific final taxes on certain transactions). Keep BIR eFPS/eBIR receipts.

Records to keep (both countries):

Bank/broker year-end statements and highest balances (for FBAR).
Official receipts (ORs), BIR Form 2307/2306 (creditable/withholding taxes), CAR for real estate sales.
FX computation worksheets (spot vs. annual average) used consistently.

7) Estate, Gift, and Succession Planning

U.S. rules for green card holders

Estate & gift tax generally apply to worldwide assets if you are U.S.-domiciled (a facts-and-circumstances test; LPR status is strong evidence).
Annual gift exclusion and lifetime unified credit are available; Form 709 for reportable gifts.
No U.S.–Philippines estate/gift tax treaty (coordination is via domestic law), so double-tax risk exists on Philippine assets.

Philippine side

Estate tax applies to the gross estate of decedents (citizens and residents on worldwide assets; non-resident aliens on Philippine-situs assets).
Donor’s tax applies to gifts; situs rules determine Philippine exposure (e.g., Philippine real property and shares in Philippine corporations are Philippine-situs).
Practical tip: Title cleanliness (TCT/CCT), CAR issuance, and estate settlement documents are crucial; consider holding structures and beneficiary designations.

8) Social Security & Payroll

No totalization agreement between the U.S. and the Philippines. Dual contributions to SSS and U.S. Social Security/Medicare can occur depending on where services are performed and employment structure. Contracting and employer-of-record setups should be analyzed carefully.

9) High-Impact Planning Moves for New LPRs With PH Assets

Map your asset inventory (banks, UITFs, shares, realty, businesses, trusts). Tag each with: income type, U.S. form(s), and Philippine tax.
Decide your first-year filing posture (dual-status vs. full-year election; married filing jointly; FEIE vs. FTC strategy).
Tame PFIC exposure (evaluate QEF/MTM feasibility; consider migrating to U.S.-tax-efficient vehicles).
Corporation owners: Assess CFC/GILTI impact, possible §962 election, and book-tax/high-tax exceptions; review transfer pricing and dividend policy.
Rental property: Set depreciation method (ADS 30-year for residential), track basis, and segregate improvements.
Treaty paperwork: Obtain U.S. residency certificates and comply with BIR procedures to claim treaty rates where applicable.
Withholding hygiene: Ensure dividend/interest/royalty payors have the correct certificates so tax is withheld at treaty or proper statutory rates.
Cash-flow & FX: Plan around Philippine final taxes (which may be non-creditable in the U.S. in some cases), and manage currency gain/loss recognition in the U.S.
Estate readiness: Align wills (U.S. and Philippine), beneficiary designations, and titling; evaluate trust usage mindful of 3520/3520-A.
Documentation discipline: Keep a compliance calendar for 1040, FBAR, 8938, 8621, 5471/8865/8858, 3520/926/8833 as applicable.

10) Red Flags & Penalties

Non-filing of FBAR/8938/8621/5471/3520 can produce large penalties even when no U.S. tax is due.
Improper FEIE + FTC stacking can waste credits or cause audit risk.
PFIC “excess distribution” computations are harsh without timely elections.
Treaty claims without Form 8833 or without satisfying LOB can be denied.
Sale of Philippine real property without proper withholding/CAR can stall title transfer and undermine U.S. credit claims.

11) Quick Checklist (First U.S. Tax Season as LPR)

Determine residency status and filing posture (dual-status vs. full-year, MFJ vs. MFS).
Build foreign asset list with max balances and peak dates (for FBAR).
Collect BIR proofs of tax and bank/broker statements.
Decide FEIE vs. FTC for salary; model both.
Identify PFICs and prepare Form 8621 plan.
Review ownership thresholds for 5471/8865/8858.
Prepare Form 8938, FBAR, and any 3520/926/8833 as triggered.
Set depreciation for PH rentals (ADS).
Confirm treaty rate eligibility and paperwork for dividends/interest/royalties.
Establish an ongoing compliance calendar and document FX methods.

Final Word

For new green card holders with Philippine assets, the biggest wins come from (i) getting residency and elections right in year one, (ii) tightly coordinating treaty/FTC/FEIE choices, and (iii) meticulous reporting of foreign accounts and entities. Early structuring can prevent PFIC and CFC headaches and preserve after-tax returns across both systems.