Best country for a freelancer / digital nomad post-covid

[ilpablo]

Hi to be honest the 6 months is required,⁢ although i spoke with some lawyers and they all say that this rule is not︀ enforced.

May I ask you who was your source for this information? How long have︁ you been in Romania? So you don't live there actually?

 

[Jock]

THE PHILIPPINES & the "residency" issue of foreign corporations & "permanent establishment".

• In the Corporation‌ Code of the Philippines (PH) there is no concept of residence for tax purposes. Instead‍ the PH applies the incorporation test.
  
• The PH does not have a CMAC test or⁠ CFC laws.
  
• A foreign corporation is considered resident only if it has been licensed to⁤ transact business within the PH.
  

Your company would therefore be a non-resident foreign corp which⁣ would not be subject to income tax as long as you do not have any⁢ income derived from sources within the PH. Even if you did, its not your liability︀ to pay it, but your customers (withholding tax). No reporting requirements.

Territorial taxation for foreign︁ corps and resident aliens (you).

The PH has not signed up to the OECD so︂ - and I am guessing here - the info from your offshore (non PH) bank︃ would not be passed to the PH government. Please correct me if wrong.

If you︄ register your company in a country that does not have a tax treaty with the︅ PH then the issue of creating a Permanent Establishment (PE) in the PH does not︆ arise as a PE is only a bilateral tax treaty concept. The Laws of the︇ PH therefore take precedence over any international conventions.

Even if you register your company in︈ a country that does have a tax treaty with the PH, in the PH PEs︉ are not allowed to register only for taxation purposes. There is no prescribed procedure for︊ it. The PH Tax court has made rulings that PEs are treated as non-resident foreign︋ corps for income tax purposes.

So even if your foreign corp has a PE in︌ the PH it is still treated as a non-resident foreign corp (no tax, see above).︍

I am not a lawyer. Best plan is to lie as low as possible. The︎ PH is a clusterfuck.

 

[uplana]

@Jock sorry to get off topic. Did you had a company in the Philippines before,‌ I'm asking since it sounds like you have some sort of experience?

Or did you‍ simply just worked with someone in the Philippines?

 

[Jock]

I have a PH company and an offshore company. I am PH resident.

 

[Mercury]

@Bagpacker FYI 😉

 

[backpacker]

@Mercury
I appreciate that you remember some of my words.
Read How Permanent Establishments Should‌ Pay their Taxes? . Understand the difference of the above compared to the matter we‍ have discussed earlier in another thread.

 

[capitanokirk]

Hello UPLANA‍
I am interested in a company as described in your signature. contact me thanks

 

[uplana]

cool, go to mentor group gold and you can‍ have it for free

 

[JustAnotherNomad]

That's not true. The purpose of tax treaties is to avoid double taxation. They don't⁤ create new tax liabilities, they only limit the application existing domestic laws of both countries.⁣
If you look at tax treaties signed by the UAE, you will see that they⁢ may state that a person or business should be taxed in the UAE instead of︀ the other country. That doesn't mean that the UAE charges any tax, it only means︁ that the other country isn't allowed to apply its tax laws and that only UAE︂ tax laws apply.
In the absence of a tax treaty, it's both countries' laws that︃ apply, which may lead to double taxation. So the question is not if there is︄ a tax treaty, but if the Philippines has a PE concept in its domestic law︅ and how it is enforced in practice.

 

[Jock]

JustAnotherNomad - thanks for your correction. I was pushing the envelope of my case there.‌

Nevertheless, it seems that a foreign corp that has a PE in the PH is‍ still not a resident foreign corp. It is still treated as a non-resident foreign corp⁠ if it is not registered (branch) with the SEC and the BIR (tax authority). Court⁤ of Tax Appeal Case 6388.

If your company is not so registered, then there is⁣ no prescribed procedure for the registration of the PE for tax purposes.
This is the⁢ basis of the article that Bagpacker linked. This absence of procedures is the crux of︀ the matter.

 

[backpacker]

@Jock
Indeed, there is a lack‌ of procedure. It is well known and the problem is with Bureau of Internal Revenue‍ (BIR). Nevertheless, "Absence of Procedures" does not mean that a foreign corporation in⁠ the Philippines is not a resident foreign corporation. In fact, every foreign corporation in the⁤ Philippines is a resident foreign corporation!
The tax appeal case (it dates back to the⁣ year 2007) does not help much and is rarely cited today. If you study it⁢ carefully you will notice that it is not a free pass.
What do I want︀ to say with this: "Absence of Procedures" does not protect you from of︁ "Existence of Procedures". It only needs a stroke of a pen to get︂ all started because by law a foreign corporation is already considered to be doing business︃ in the Philippines, thus being resident and fully liable to local taxation.
Statute of limitation︄ in the above case is three years, meaning that BIR has three years to conduct︅ an assessment from the last day prescribed by law for the filing of the return︆ (nevermind "Absence of Procedures"!). Due to the nature of how statute of limitation︇ is calculated BIR has more than four years. That is a long time in a︈ rather shaky jurisdiction.

Quintessence: A resident alien who needs to own a foreign corporation for︉ real business purposes has no choice and should pray to God that BIR does not︊ get its act together.
All other resident aliens would be foolish to incorporate an "︋offshore" company. The latter case would even be "Super-Mega" foolish when such a foreign︌ corporation is only incorporated for managing ones own private assets.

 

[JustAnotherNomad]

I know nothing about the⁤ Philippines. However, in Western countries only foreign companies have a PE. So there can either⁣ be a resident company or a non-resident company with a PE. So this is just⁢ normal.

 

[freegeek]

Go first from Spain to‍ France and enter Andorra from the French side. Spain would never know that you are⁠ in Andorra and there are no border controls between Spain and France because Schengen

 

[freegeek]

Andorra?

 

[Jock]

Bagpacker - I value your input but would politely disagree with what you say about‌ the residency of a foreign corp. Under PH law a resident foreign corporation is a‍ foreign corporation that is duly licensed by the SEC to transact business within the Philippines⁠ (through a branch office). By default, if it is not licensed by the SEC then⁤ it falls outside the legal definition and is not resident. Additionally, as mentioned, in the⁣ Corporation Code of the PH there is no concept of residence for tax purposes. The⁢ PH instead applies the incorporation test.

The foreign corp could have a PE, but, as︀ discussed, there is no way to obtain a TIN.

My understanding is that the foreign︁ company "should" apply to the SEC to open a branch, but under PH laws a︂ branch must "derive income from sources within the PH". What I would like to know,︃ is if the business was engaged in manufacture & export out of the PH, with︄ no domestic sales whatsoever, would it be deriving income from sources within the PH? If︅ not, then a branch may not be allowed.

Similarly, any such branch would only be︆ taxed on income "from sources within the PH". So if such a branch could︇ be established, would it be tax exempt?

I don`t know. Any thoughts appreciated.

 

[backpacker]

This is correct when it comes to licensing and SEC. However, here⁠ we are talking about BIR and tax code.
I want to link an older article⁤ by Attorney Dawilan Tax obligation of a permanent establishment | Fulvio D. Dawilan . Even⁣ back then the problem was obvious and his comment is quite clear.
I acknowledge that⁢ there is a lack of proper guidelines regarding the matter. However, the lack thereof does︀ not mean a free pass.

@Jock There is a significant difference in our chain of︁ arguments:

• You follow old rulings by the Court of Tax Appeals which date back to︂ years 2005 and 2007 (they were both applicable on single cases at that time).
  
• I follow the more recent approach of BIR and the OECD guidelines. Note that today it︃ is common understanding to apply for the general TIN which suffice to fulfill tax obligations.︄
  

Not only "should". It "must" apply to the SEC. We︇ can politicize this point by looking at various news outlets like CNN or Rappler (note the differences). Once the application has been deposited it is up to the SEC to︈ decide.
Yes, it would be︋ deriving income from sources within the PH. And it would have tax obligations in the︌ PH. Again, Attorney Dawilan explains it quite good.
-------------------------------------------------------------------------------------------------------------------------------------------------------------
On a side-note and to illustrate︍ that BIR is well aware about the creation of PE's (and circling in on it)︎ is RMC No. 83-2020:
-> Inadvertent Creation of PE https://www.bir.gov.ph/images/bir_files/internal_communications_2/RMCs/2020 RMCs/RMC No. 83-2020.pdf

 

[complex]

I concur. Laws are rarely followed in the Philippines. For an everyday example -︇ if your vehicle gets hit and the driver simply runs away, nothing will happen. Police︈ will "lose" paperwork, courts will simply ignore all laws and dismiss your case. You have︉ no recourse. It cannot be compared to any civilized country at all. Your only option︊ is bribery or knowing powerful people but that's also highly risky for other reasons.

Philippines might sound good on paper but it will become hell for most people coming from︋ lawful countries sooner or later (90% of foreigners intending to permanently stay end up moving︌ within 7-8 years or worse, end up dead).

 

[complex]

Since no foreigner⁣ can officially own more than 40% of a business in the Philippines, I don't see⁢ how that's possible. You can go through lists of successful Filipino businessmen and there are︀ almost no foreigners present. With a foreign heritage, absolutely. I've witnessed how locals with a︁ great understanding of the landscape are regularly cheated by employees, it's definitely not about "cultural︂ understanding".

 

[backpacker]

True! And it does not even matter because the guy who‍ runs away would anyway not be able to pay for the damage he has caused.⁠
Note: A savvy foreigner never drives himself in his own vehicle in a developing country!⁤
... which is the case in most developing⁢ nations.
True! Their mistake: They behave like being in Europe or the US. People who love︃ regulations should stay in over regulated (i.e. lawful) countries.
Splitting hairs: There are zero foreigners present.
Reason:
Now you read this ...
... in︊ context and you will learn that it was not about Zobel, Gokongwei , Si and︋ the likes. It all started about a discussion regarding SIRV two months back and spreads︌ over two threads.
-------------------------------------------------------------------
Should you have any engagement in the Philippines it might well︍ be that you are disappointed. Many are (mostly because of their expectations being too high).︎
However, you will be hard pressed to find a country on the development level (and️ in the price category) of the Philippines with the same clear structure of law and‌ tax code together with a preferential tax system.

 

[JohnLocke]

Personally I would look into Cyprus, Switzerland and even the UK as foreign resident, you‌ will check with a tax advisor in the UK if the laws are still the‍ same, the last time I checked you get 7 years tax freedom in the UK⁠ if you don't do business there but offshore.