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

[BlinkHood]

backpacker said:
Philippines: You will get into significant trouble not paying your due taxes if you generate anything else than passive foreign sourced income.
The Philippines is perfect when you're retired, still like some fun, and have only passive foreign sourced income.
Otherwise, better look elsewhere.
The country might look a bit chaotic but there is always the day"when it happens". And "it happens" more often than not. As a foreigner you are also always at the receiving end.
Generally speaking, you become a tax resident once you intend to permanently reside in the Philippines. This intention starts once you have been granted the relevant status.
I wrote about it several times in this forum. Just use the search function.

Some people here claim that the Philippines doesn't care. This is outdated. Don't fall for it.
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Thanks for the answer. Even if you could 'get away' with it I would probably not do it. I feel like at some point it's not worth the possible fines (or even legal consequences) of not paying your taxes.

By passive income would it be considered capital gains from stocks? I guess sports betting income wouldnt be considered passive income?

 

[backpacker]

BlinkHood said:
I feel like at some point it's not worth the possible fines (or even legal consequences) of not paying your taxes.
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Yes! That's exactly what I am trying to explain in this forum for years already. Pay what is due. No tricks.

BlinkHood said:
By passive income would it be considered capital gains from stocks? I guess sports betting income wouldnt be considered passive income?
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Capital gains from stocks are considered passive income in the Philippines, if the company is not "majority" owned by you and you do not do it for a living (i.e. professional trading).
For a resident alien this means that such capital gain is considered foreign sourced income, if stocks are traded/bought/sold on a foreign stock market and are not Philippine companies.
If, as a resident alien, you trade local stocks and/or have income in the form of local dividends, such passive income will be taxed as if you were a resident citizen.

Betting is not considered passive income.

 

[Mike Forman]

backpacker said:
Philippines: You will get into significant trouble not paying your due taxes if you generate anything else than passive foreign sourced income.
The Philippines is perfect when you're retired, still like some fun, and have only passive foreign sourced income.
Otherwise, better look elsewhere.
The country might look a bit chaotic but there is always the day"when it happens". And "it happens" more often than not. As a foreigner you are also always at the receiving end.
Generally speaking, you become a tax resident once you intend to permanently reside in the Philippines. This intention starts once you have been granted the relevant status.
I wrote about it several times in this forum. Just use the search function.

Some people here claim that the Philippines doesn't care. This is outdated. Don't fall for it.
Click to expand...

Could you elaborate on that as a person who is not a citizen of the Philippines (that is, someone who is defined as an alien), regardless of whether the person is a resident or a non-resident, is taxed ONLY on the individual's income from Philippines sources. Likewise, non-resident citizens are taxed only on their income from Philippines sources.

There are plenty of foreigners and Filipino who receive a foreign income and don't pay taxes, as long as you make sure you are not working in an office or for a local business the risk will be very low. Even local immigration head confirmed that if you work from home and not do local business there is no issue.

Many foreign business owners here even don't have a work permit and act just as shareholder, while in fact they are all the time present in their business (but not doing any work, just get income). I wouldn't recommend that but if you are in Philippines and don't work for/with any local business you should be fine.

 

[backpacker]

Mike Forman said:
Likewise, non-resident citizens are taxed only on their income from Philippines sources.
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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!

Mike Forman said:
the risk will be very low.
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We had that before. Not worth discussing such a point of view.

Mike Forman said:
local immigration head confirmed that if you work from home and not do local business there is no issue.
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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!

 

[JackAlabama]

backpacker said:
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!
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easy interpretation of this: working for a foreign corp is not a source within the Philippines, since by def that company is not within the Phils.
Will foreign substanceless corps being redomiciled to the Phils by default would be an interesting question.

 

[Marzio]

JackAlabama said:
easy interpretation of this: working for a foreign corp is not a source within the Philippines, since by def that company is not within the Phils.
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What you said is so dangerous that i really hope you aren't following your advice.

The bottom line is that working from within a country makes it local sourced income.

That's why in the sheet i created there's a column that says "is it enforced?" because there are some countries that don't care like Panama or Paraguay. The majority of other countries instead will care.

 

[JackAlabama]

Marzio said:
What you said is so dangerous that i really hope you aren't following your advice.

The bottom line is that working from within a country makes it local sourced income.
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Just look up and add some official sources to it under Notes. If it is such a clear cut thing, its very easy to find.
Especially Philippines being on the enforcement level of Germany justifies at least a few official info/sources.

Mike Forman said:
Could you elaborate on that as a person who is not a citizen of the Philippines (that is, someone who is defined as an alien), regardless of whether the person is a resident or a non-resident, is taxed ONLY on the individual's income from Philippines sources. Likewise, non-resident citizens are taxed only on their income from Philippines sources.

There are plenty of foreigners and Filipino who receive a foreign income and don't pay taxes, as long as you make sure you are not working in an office or for a local business the risk will be very low. Even local immigration head confirmed that if you work from home and not do local business there is no issue.
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That seems more logical and actually reflect reality.

Last edited: Jul 13, 2023

 

[Marzio]

JackAlabama said:
If it is such a clear cut thing, its very easy to find.
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I'm not talking about enforecement of the law, i'm talking about the dangerouseness of your definition territorial taxation "working for a foreign corp is not a source within the Philippines, since by def that company is not within the Phils." since denotes a misunderstanding of how territorial taxation works.

 

[JackAlabama]

Marzio said:
I'm not talking about enforecement of the law, i'm talking about the dangerouseness of your definition territorial taxation "working for a foreign corp is not a source within the Philippines, since by def that company is not within the Phils." since denotes a misunderstanding of how territorial taxation works.
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Ok, how does it work?

Im not talking about enforcement of the law either.
Its just not a clear cut answer, otherwise a local work permit should be easily obtainable that way.
Thats why every aspect of territorial tax needs official sources to establish a clear picture.

 

[Marzio]

JackAlabama said:
Ok, how does it work?
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This article will explain how territorial taxation works.

While that article talks about Georgia, the principle is true for all territorial taxation countries:

Most foreign income (with limited exceptions) earned while you are in [territorial country] is not considered foreign-sourced.

 

[JackAlabama]

Marzio said:
This article will explain how territorial taxation works.

While that article talks about Georgia, the principle is true for all territorial taxation countries:

Most foreign income (with limited exceptions) earned while you are in [territorial country] is not considered foreign-sourced.
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That was my point. Each place is individual and these "limited exceptions" is what drives value to your document underlined with the respective articles (primary sources ideally).

 

[sergeylim88]

what about Isle of Man, Monaco?

 

[JustAnotherNomad]

Monaco: I'm too poor

IoM, Sark etc.: Very few tax treaties. Might be a solution on paper, but then again, if the benefits are so limited (due to the absence of tax treaties), it would probably be cheaper to just go with Paraguay or some other country with residency without tax residency...

 

[Marzio]

JustAnotherNomad said:
it would probably be cheaper to just go with Paraguay or some other country with residency without tax residency...
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Then you should investigate Dominican Republic.

https://www.offshorecorptalk.com/threads/thoughts-on-dominican-republic.39121/#post-233792

 

[JustAnotherNomad]

Not a lot of tax treaties.
But you should add China to the list. Lots of tax treaties and it seems like there's no tax on foreign-sourced income for 6 years, and you can reset the clock by traveling out of the country for 30+ days within one calendar year.

Last edited: Jul 13, 2023

 

[Marzio]

JustAnotherNomad said:
Not a lot of tax treaties.
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Man you're never satisfied!

JustAnotherNomad said:
you can reset the clock by traveling out of the country for 30+ days within one calendar year.
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What do you mean by "reset the clock"?

 

[JustAnotherNomad]

Marzio said:
Man you're never satisfied!
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😎

Marzio said:
What do you mean by "reset the clock"?
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There's no tax on foreign-sourced income for 6 years after you become tax resident.
Possibly even only if you spend 183+ days per calendar year in China, I'm not quite sure. It seems like you can be tax resident spending <183 days as well, and then maybe those 6 years wouldn't even start counting?
Anyway, if you travel outside of China for 30+ days in a calendar years, before the 6 years have elapsed, you get another 6 years.

https://www.china-briefing.com/news/tax-residency-china-six-year-rule-clarified/

 

[Marzio]

JustAnotherNomad said:
If you travel outside of China for 30+ days in a calendar years, before the 6 years have elapsed, you get another 6 years.
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Never heard about that!

 

[sergeylim88]

why would you need tax treaties if you stay there for 183+ days a year?
are you talking about benefits in terms of reduced withholding tax?

 

[saintjohnny]

Marzio said:
Then you should investigate Dominican Republic.

https://www.offshorecorptalk.com/threads/thoughts-on-dominican-republic.39121/#post-233792
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This or Panama. Territorial, no CFC laws, foreign-sourced income is exempt. No need to file anything.