I'm hesitant to jump in, as I'm extremely grateful to
@backpacker, who is extremely knowledgeable on the Philippines.
I'm not here to refute any of facts he's stated, but maybe add a different perspective/interpretation that others can consider (or not), re: risk & certain outcomes.
Philippines: You will get into significant trouble not paying your due taxes if you generate anything else than passive foreign sourced income.
From my research (including reading some of
@backpacker's past links to legal interpretations), I'd rephrase that:
If you generate
active foreign-sourced income, including receiving income from your foreign corp, in the unlikely situation the BIR found out and decided to prosecute, there is some possibility — after a long time coming to trial — that a number of legal dominos
could fall not-in-your-favour. But I don't know personally know of any such stories; there certainly isn't an epidemic of them.
More than in the average western country, Philippine law and policy, as well as different government bodies, are often at odds with each other. Ask 10 people with exactly the same jobs in different regional offices what any given law means and you will get at least 5 different answers. With respect to some things
@backpacker has written in other posts, there are indeed some interestingly-written sections in the law that could question where business is conducted, and a few tax lawyers have written their opinions on what they could/might mean. On the other hand, I think it's obvious that the government has made some very clear policy choices: in my opinion, the Philippines more-or-less markets itself as a jurisdiction with very little interest in the foreign income of resident/non-resident aliens.
I am not aware of any arm of the BIR that sends agents out to find foreign
digital nomads getting paid by european clients for building websites in Filipino coffee shops. I am not aware of any large campaign to crack down on foreigners and their
offshore companies managed from a laptop in their Philippine home. Almost all stories I've heard of foreigners getting into trouble have been around Philippines-sourced income, or questionable domestic activities; and they almost always have other mitigating circumstances (already doing other illegal/suspicious activities, or they've seriously pissed off someone powerful). As always, if you and your offshore corp are worth 10s or 100s of millions of US dollars, the risks and optics may be different for you.
Although I haven't tried, I suspect if you were a non-resident alien extending their tourist visa year-after-year, and decided you wanted to voluntarily pay taxes on your active offshore corporation, the BIR would have no idea how to assist you, and you would have a very hard time fulfilling all the requirements to submit a valid
tax return.
Culturally, there is little expectation of voluntary tax compliance in the Philippines at the individual level. Even for successful filipinos, their company withholds the tax on their salary; upon sale of real estate, capital gains are paid at time of land transfer;
investment capital gains are withheld by the brokerage… very, very few people voluntarily file personal returns or tell the gov't anything about their activities. The BIR's main strategy for tax revenue: only expect to collect tax if you can get someone else (employer/broker/bank/etc.) to be a gatekeeper.
