Tax Guide for US-Paid Executives Relocating to the Philippines

BIR Registration & US-PH Compliance (Philippine context)

This is general information for planning and issue-spotting. Tax rules change and individual facts matter. For personal advice, consult Philippine counsel/CPAs and a US international tax advisor.

1) First principles: how the two tax systems will look at you

Two parallel frames apply at the same time:

Philippines (PH) — taxes based on source of income and (for non-citizens) days in country/engagement in business.
United States (US) — if you’re a US citizen or green-card holder, you’re taxed on worldwide income regardless of where you live, with relief via exclusions/credits.

Philippine individual status (for non-Filipino executives)

Resident Alien (RA): generally present in the Philippines for >180 days in a calendar year and engaged in trade or business/employment there.
- Tax base: Philippine-source income only, at graduated individual rates.
Non-Resident Alien Engaged in Trade or Business (NRA-ETB): typically >180 days, but not “resident.”
- Tax base: Philippine-source income at graduated rates.
Non-Resident Alien Not Engaged in Trade or Business (NRA-NETB): generally ≤180 days.
- Tax base: Philippine-source income, usually by final tax on gross (commonly 25%) rather than graduated rates.

Key PH sourcing rule for pay: Compensation for services is sourced where the services are physically performed. If you work while in the Philippines, that portion of your pay is Philippine-source even if paid by a US employer in USD to a US bank.

US status & interaction

US citizens/long-term residents file Form 1040 annually on worldwide income.
Primary relief tools:
- Foreign Earned Income Exclusion (FEIE) — Form 2555 (physical-presence or bona-fide residence tests).
- Foreign Tax Credit (FTC) — Form 1116 (credit PH income tax against US tax on the same income).
- Housing exclusion/deduction (under §911) in some cases.
You generally can’t take an FTC for income you exclude under FEIE. Many executives model both paths and pick the better outcome.

2) Philippine payroll vs. self-assessment: who withholds?

Your withholding posture depends on whether there is a Philippine withholding agent.

You are on a Philippine payroll (local employer or PE/branch/ROHQ with PH registration).
- The employer withholds monthly on compensation and handles most routine filings.
- You typically receive a year-end BIR Form 2316 (certificate of compensation & tax withheld).
- If you had only one employer for the year and withholding was correct, you may qualify for substituted filing (no individual return). Otherwise, file an annual individual return.
Paid solely by a US employer with no Philippine presence/registration (no PH withholding agent).
- There’s no Philippine payroll withholding, so you must register for a TIN and self-assess/pay Philippine income tax on your PH-source compensation.
- Expect to file an annual return for individuals with compensation income and settle any tax due directly. Some RDOs will also instruct periodic payments when no withholding is made.

Shadow payroll option: If a Philippine affiliate exists or a PE is created, many groups run a PH “shadow payroll” purely to calculate and remit PH withholding while the US entity continues to cash-pay. This greatly reduces individual compliance friction and aligns with fringe-benefit rules.

3) BIR registration: getting your TIN and where to register

You need a Philippine TIN to file, pay taxes, open a local payroll file, or (often) open a bank account.

Form to use (individuals)
- BIR Form 1902 — for individuals earning purely compensation (local or foreign employer).
- BIR Form 1901 — if you will be self-employed / consulting (or mixed income).
- BIR Form 1904 — for certain one-time or special cases (not typical for ongoing employment).
Where to register: with the Revenue District Office (RDO) having jurisdiction over your Philippine residence (or the employer’s RDO if you’re on their payroll, depending on local practice).
Typical supporting documents (expect variations by RDO):
- Passport bio page and latest arrival stamp.
- Work visa (e.g., 9(g)) or other authorized stay; AEP (Alien Employment Permit) or equivalent.
- Local proof of address (lease, utility bill, barangay certificate).
- Employment contract/assignment letter.
- If self-employed: application for books of accounts and, where applicable, invoices/official receipts (employees don’t need these).
Annual registration fee: Historically required only for those “engaged in business.” Recent reforms have changed aspects of registration and invoicing; follow the current RDO instruction at the time you register.
Digital systems: eBIRForms/eFPS for filing; ePayment channels (online banking, payment partners) for remittances. Your RDO will confirm which platform you should use.

4) What’s taxable in the Philippines for an executive?

A) Cash salary and allowances

Taxable if attributable to services performed in the Philippines.
Foreign exchange does not change taxability. Convert payroll items to PHP using BIR-accepted FX conventions (RDOs may specify BSP reference rates or employer treasury rates applied consistently).

B) 13th-month pay and bonuses

A statutory 13th-month pay applies to local employment. “13th month and other benefits” are exempt up to a capped amount per year (commonly cited as ₱90,000, subject to change). Excess over the cap is taxable compensation.

C) Benefits-in-kind (Fringe Benefits Tax — FBT)

For managerial/supervisory employees, many non-cash perks are subject to FBT, a final tax on the employer computed on a grossed-up monetary value (GUMV).
Common FBT items: employer-provided housing, vehicle, club dues, certain education allowances for dependents, non-business travel, and similar personal-benefit items.
De minimis and certain employee-convenience benefits may be excluded if they meet strict criteria.
If there is no Philippine withholding agent (pure US payroll, no PH presence), FBT may not be practically collectible from the employer. In such cases, expect the BIR to view the item as taxable compensation to you unless you can clearly show an exclusion.

D) Equity compensation (RSUs, stock options, RSAs)

Source follows the service period: portions of vest/exercise spread relating to services performed in the Philippines are Philippine-source.
Typical treatment: additional compensation (subject to payroll tax/withholding if a PH agent exists). Facts can push equity into FBT for managerial employees; plan documents and actual practice matter.
Track grant-to-vest (or grant-to-exercise) days in and out of the Philippines to apportion fairly.

E) Other income streams

Interest/dividends/capital gains from Philippine payors/situs may be taxable in the Philippines under regular or final-tax regimes.
Foreign-source passive income (e.g., US brokerage interest/dividends) is not taxable in the Philippines for aliens (resident or non-resident), but is taxable in the US if you’re a US person.

5) The US–Philippine tax treaty: short-term assignments & PE risk

The treaty contains a “Dependent Personal Services” article with a ~183-day presence test. If you meet all conditions (including that the pay is not borne by a Philippine permanent establishment (PE) of your employer), Philippine income tax may be relieved for short stays.
Documentation & process: Treaty relief in the Philippines generally requires proper filings/claims and contemporaneous documentation; procedural circulars have evolved over the years. Build treaty analysis before arrival and maintain travel calendars and payroll cost-charge documentation.

PE (permanent establishment) caution: A senior executive working from the Philippines for a US company can create PE exposure if they habitually conclude contracts or effectively manage key functions from the Philippines. If a PE exists, the US employer may face Philippine corporate income tax, VAT, registration, and withholding-agent obligations. PE risk and payroll design (including “shadow payroll”) should be analyzed upfront.

6) Immigration & labor touchpoints (tax-relevant)

Work authorization (e.g., 9(g) pre-arranged employment visa or 47(a)(2) for certain projects/zones) and AEP from DOLE are commonly required to work and to support BIR registration.
Local statutory contributions (if on a PH payroll):
- SSS (pension & EC), PhilHealth (health insurance), Pag-IBIG (housing fund). Foreign nationals employed in the private sector are often compulsorily covered unless an exemption applies (e.g., covered by a bilateral agreement). Employer and employee contributions are shared.
If you remain on pure US payroll and no PH employer exists, these Philippine social contributions typically aren’t withheld; however, a later PE/local hire may retroactively trigger obligations.
US Social Security/Medicare: Absent a bilateral totalization agreement between the US and the Philippines, US FICA may continue for services for a US employer; special elections (e.g., §3121(l)) and corporate structuring can affect outcomes. Coordinate with US payroll.

7) Your compliance calendar (practical checklist)

Before arrival (4–12 weeks)

Map your days in PH vs. treaty 183-day rule and PH 180-day classification.
Evaluate PE risk and decide on local registration (entity/branch/PE) and/or shadow payroll.
Decide on tax policy (tax equalization vs. protection; hypothetical tax; home/host payroll splits).
Line up visa/AEP documents and a Philippine address (for RDO).
Model US FEIE vs. FTC for the year.

On arrival / first month

Register with BIR (get TIN using Form 1902 for employees, 1901 if self-employed).
If on PH payroll, ensure the employer enrolls you and starts withholding; if not, set up eBIR/ePayment and plan for self-assessment.
Open a PHP account if you’ll pay taxes directly.
Track travel days precisely.

During the year

If on PH payroll, confirm correct withholding tables and FBT handling for benefits.
If no PH withholding agent, remit periodic payments as instructed by your RDO and keep ledgers of compensation, FX rates, and equity events.
Keep evidence for treaty/PE positions (intercompany charges, cost-center, who bears remuneration).

Year-end & after year-end

Obtain BIR Form 2316 from each PH employer; reconcile to payslips.
File annual PH individual return (if required), settle any balance due.
US filing: Form 1040; attach Form 2555 (FEIE) and/or Form 1116 (FTC) as chosen; include Form 8938 (FATCA) and FBAR (FinCEN 114) if foreign accounts cross thresholds; consider Form 8621 for any PH mutual funds (PFIC rules).
If departing the Philippines, plan offboarding (final 2316, certificate requests) and, for immigration, any Exit/Emigration Clearance as applicable.

8) Designing your compensation package (PH-savvy)

Housing & cars for managerial staff often trigger FBT; sometimes converting these to taxable allowances and grossing up via payroll is simpler (especially with no PH withholding agent). Model both.
Equity: Track grant/vest/exercise timelines and days in PH. If you’ll vest while in the Philippines, consider deferring vesting until after departure or accelerating before arrival to simplify sourcing (subject to plan rules/insider windows).
13th-month: If on PH payroll, align bonus timing and the ₱90,000 exemption cap.
Remote-first executives: If you’ll be in the Philippines most of the year, consider formalizing shadow payroll early to avoid large year-end self-payments.

9) Common pitfalls (and how to avoid them)

“Paid in the US, so not taxable in PH.” False. Where you work controls compensation sourcing.
Ignoring FBT on executive perks. If there’s a PH employer/PE, FBT is the employer’s final tax; without one, assume taxable compensation unless clearly excluded.
Treaty reliance without paperwork. If you plan to use the 183-day treaty relief, maintain day counts and documents showing the pay is not borne by a PH PE.
Equity apportionment mistakes. RSUs/options often span multiple countries; apportion based on service days, not payroll location.
US double-counting or double-benefit attempts. You can’t credit taxes on income you exclude under FEIE.
State tax surprises. Some US states are sticky on residency; plan the state exit.
Late foreign asset reporting. FBAR/FATCA penalties are severe; inventory accounts early.

10) Forms & artifacts you’ll likely touch

Philippines (individual)
- BIR Form 1902 (employee TIN registration) / 1901 (self-employed).
- BIR Form 2316 (certificate of compensation & withholding).
- Annual individual income tax return (for compensation earners; file if not eligible for substituted filing or if you have multiple employers/other income).
- Fringe Benefits: handled by employer under final withholding regimes (form numbers and eFPS schedules vary).
United States
- Form 1040 + Schedule 1 (if needed).
- Form 2555 (FEIE) and/or Form 1116 (FTC).
- Form 8938 (FATCA), FBAR/FinCEN 114, Form 8621 (PFIC), W-2/Form 1042-S (if applicable), and state forms.

11) Special scenarios

Short-term secondment (<183 data-preserve-html-node="true" days): Treaty may shield PH tax if conditions met (no PE bearing the cost, etc.). Watch FBT on benefits provided locally and PE risk from executive authority.
Dual-hat (regional) executives: Keep time allocation calendars and cost-sharing documentation. Consider split payrolls and multiple shadow payrolls if you’ll physically work across countries.
Switching to consulting: If you move from employment to self-employment in the Philippines, you must re-register (Form 1901), register books, and issue invoices/ORs; you’ll file quarterly and annual business returns, and potentially be subject to VAT or percentage tax depending on turnover.

12) Action template (one-page plan)

Decide structure: PH payroll/PE + shadow payroll vs. remain US-only (with self-assessment in PH).
Immigration: 9(g)/AEP (or alternative) queued.
BIR registration: Get TIN (1902 or 1901), confirm RDO, set up eBIR/eFPS and ePayment.
Payroll design: Model FBT vs. taxable allowances, equity timing, 13th-month cap.
Treaty assessment: Are you under or over 183 days? Is pay borne by a PH PE? Document.
US modeling: FEIE vs. FTC, housing, and state exit.
Tracking: Maintain day counts, FX rates, equity schedules, and intercompany cost charges.
Quarterly hygiene: Reconcile withholdings/self-payments; adjust for equity events.
Year-end: Collect 2316, file PH annual return if required, then US (and state) filings plus FBAR/FATCA.

Final word

With US-source pay hitting PH tax rules the moment you physically perform services in the country, the cleanest experience usually comes from setting up a Philippine withholding mechanism (local payroll or shadow payroll), documenting any treaty position, and coordinating US FEIE/FTC strategy. Build the framework before you move, and you’ll avoid nearly all of the pain points executives run into.