Are OFWs Required to File Income Tax Returns?

There are too many questions about tax nowadays and too few people who answer them satisfactorily. Given that ignorance of the law is no excuse, people are oftentimes skeptical of what is taxable and what is not, as well as those that are tax-exempt.

Asking from government offices are also takes too long and offers too general and mostly vague answers which only makes people more confused.

Here we try to answer four of the frequently asked questions.

First, are OFWs exempt from filing income tax return (ITR)? What about travel tax and airport fees? And where do you claim or apply for tax exemptions?

Yes, Section 23 of the Philippine Tax Code states that OFWs do not need to file ITR as long as they don’t have other means of income in the Philippines, either from business or employment but they must register with the Philippines Overseas Employment Administration (POEA) with valid Overseas Employment Certificate (OEC) to claim their tax exemptions namely, Income Tax, Documentary Stamp Tax and Section 35 of Republic Act No. 8042 or “Migrant Workers and Overseas Filipinos Act of 1995 and amended by Section 22 of Republic Act No. 10022 Travel Tax including airport fees.

Second, what are VAT-exempt transactions and how you issue receipts to these? What are the guidelines and enumeration of the VAT-exempt supplies?

Section 109 of the tax code provides the VAT-exempt transactions and these include “Sales and importation of agricultural and marine food products in their original states; livestock and poultry of a kind generally used as, or yielding or producing foods for human consumption; and breeding stock and genetic materials” and “Sale or importation of fertilizers, seeds, seedlings and fingerlings; fish, prawn, livestock and poultry feeds, including ingredients, whether locally produced or imported, used in the manufacture of finished feeds (except specialty feeds for race horses, fighting cocks, aquarium fish, zoo animals, and other animals considered as pets).” As for receipts, suppliers can issue one receipt or invoice as long as it indicates clearly the breakdown of those with VAT and NON-VAT transactions.

BIR_Form_1703

Third, if you win an international competition and will receive a cash prize and medal, certificate and/or trophy for it, is it subject to tax? What if this is for a minor?

Section 32 of Philippine Tax Code states that certain prizes and awards is exempt to tax. That is if the “Prizes and awards made primarily in recognition of religious, charitable, scientific, educational, artistic, literary or civic achievement but only if the recipient was selected without any action on his part to enter the contest or proceeding, and the recipient is not required to render substantial future services as a condition to receiving the prize or award”. Another is if it is in a sports competition – “all prizes and awards granted to athletes in local and international sports competitions and tournaments, whether held in the Philippines or abroad and sanctioned by their national sports association”.

Lastly, are lotto winnings subject to tax too?

No, winnings from the lotto are exempt of tax.

Hopefully, we have helped you with your questions and saved you the time, expense and effort of going to the local government for your inquiry.

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