Are you ready for this one?

We all say that we wish the Philippines could curb corruption, and I think we all mean it.  But, sometimes actions can be surprising and move in a way that we did not expect.  I am thinking that such is the case in something new that will be coming out.

The Philippines has introduced a new procedure under which all Filipinos will be required to file what will be called an “Annual Information Return” with the BIR (Bureau of Internal Revenue), the tax agency here in the Philippines.  The Annual Information Return will be called under the acronym “AIR”.

So, what is an AIR?

Well, an AIR will be very similar to the current SALN (Statement of Assets, Liabilities and Net Worth).  The SALN is a document that politicians must currently file on a regular basis.  Basically, the SALN shows your assets and liabilities at the time of filing.  At the next filing of a new SALN, it will be compared to your previous SALN and then your salary is figured in to see if your assets or net worth has grown disproportionately compared to what it should be.  For example, if a politician files an SALN that shows that he has a net worth of P10M, and a year later his net worth increases to P30M, but his salary is only P500k/year… well, something is amiss and they will investigate to find out where all of his worth came from.

Something in the Air

Something in the Air

So, under the new AIR system, private individuals will be required to file AIR reports on an annual basis.  The report will be filed with the BIR, and they will investigate any jumps in net worth that do not align with the reported income that was taxed.

Now for a bit of a surprise.

Are Foreigners a Target

Are Foreigners a Target

Not only will Filipinos be required to file an AIR, but foreigners will too.  In fact, not only foreigners who are residing in the Philippines, but in some cases even a tourist here will be required to file an AIR report.  Here is what the Philippine Daily Inquirer said:

Learn Bisaya/Cebuano

Filing of the AIR is being required of private individuals, including foreigners residing in the Philippines as well as non-resident foreigners who are engaged in business here.

Even then, the BIR chief said that the AIR filing would be mandatory starting tax year 2011, the deadline of which is on April 15 next year if the taxpayer is also filing the ITR (income tax return), or May 15 if the taxpayer is filing the AIR alone.

The AIR is intended to detail incomes that are subject to final withholding taxes or “final tax” and exclusions from gross income.

Funny thing is that foreigners are not liable to pay Philippine income taxes if their income is earned outside the Philippines.  For example, even though I live here, the money I earn is earned outside the Philippines, and thus is not taxable by the Philippine Government.  However, it would appear that I will be required to file an AIR with the BIR.

The way that the Inquirer article is worded, though, it could be interpreted in different ways.  When it says:

Filing of the AIR is being required of private individuals, including foreigners residing in the Philippines as well as non-resident foreigners who are engaged in business here.

Does that mean that all foreigners residing in the Philippines must file?  Or, does it mean that all foreigner residing in the Philippines who are engaged in business here must file?  It could mean that all foreigner residents and all non-resident foreigner who are engaged in business must file.  Or, it could mean that only resident and non-resident foreigners who are engaged in business must file.  It is confusing and poorly written, to be honest.

About a year ago, or so, when the Philippines started requiring foreigners here on a tourist visa to start getting ACR I-cards, I felt that it was a wrong move for the country to make.  Now, it would seem that the next move is to start getting even some tourist visa foreigners to file a report of assets and liabilities with the BIR?  Frankly,  a lot of foreigners likely will balk at coming to the Philippines, even for a vacation.  Oh, you will say that a person coming for a vacation will not file?  Oh, my friend…. you may be wrong on that.

Take this example.  Let’s say that a wealthy person, let’s say Donald Trump as an example is involved in business here in some way, even just as an investor in a company here.  A couple of years ago, there was talk that Trump was getting involved in some kind of Real Estate Venture up in the Subic Freeport.  I don’t know for sure if Trump’s company ever materialized or not, but let’s say that it did.  Trump could well be only an “arms length investor” under which he really would have no role in the day to day operation of the company.  Now, let’s say that Trump came to the Philippines with his family for a vacation in seclusion, to get away from everything, say in Palawan.  Well, under this scenario Trump would be required to file an AIR, because he is a non-resident traveler here, and also has a role in a business here, even though his trip here and his investment have no relation to each other.  But, under the law, he would be required to file the report.  Now, do you think that somebody like Trump would want to file a report with the Philippine Government showing all of his liabilities, assets and net worth?  No, he would not, because it is none of the business of the Philippine Government, and it is sensitive information that he would not want to end up in the public.  So, imagine, this could happen with even small investors or small businessmen.  Did you give your wife’s family P5,000 to raise a pig or two?  Well, technically, when you come visit the Philippines, you are liable to file an AIR.

Personally, I think this is a wrong move, especially requiring it of foreigners who have no tax liability here.

This new requirement is already enacted.  However, for this year, the filing of an AIR is voluntary.  Starting next year, it will be mandatory.  Are you ready?

 

Post Author: MindanaoBob (962 Posts)

Bob Martin is the Publisher & Editor in Chief of the Live in the Philippines Web Magazine. Bob is an Internet Entrepreneur who is based in Davao. Bob is an American who has lived permanently in Mindanao since May 2000. Here in Mindanao, Bob has resided in General Santos City, and now in Davao City. Bob is the owner of this website and many others.


Comments

  1. Mike says

    I dunno Bob,

    Does the Filipino government purposely go out of it’s way to kill foreign investment and tourism? Seems that way to me…

    Considering how well they are doing things on their own, who needs foreign investment and tourism dollars, I mean, pesos?

    I love the Philippines, but the BIR and BI are making things difficult…

    Am I too harsh?

    • says

      Hi Mike – It is not the fault of the BI or the BIR, they are only enforcing the laws that the Congress passes. It is their job to do that no matter how bad the law is. But, indeed, this is a killer of foreign investment. Why invest when you will be under deep scrutiny for doing so?

      • Mike says

        I stand corrected on who is really causing this…yes, the Congress makes the laws. But I still insist that the BI and BIR abuse their authority given by Congress. What government agency on Earth doesn’t? And you are right on about the vague language of the laws stated by the newspapers. Let’s see what the laws actually say when passed/published…

        Did you hear about Japan?

        Have a good weekend ahead!

        • says

          We are under a tsunami warning right now, Mike. Within the next hour or so, it is expected that we will get a tsunami in Davao… we shall see if it materializes. I hope not!

          • Mike says

            Lukily Bob, you are on the far (south) side of Mindanao, well protected from the Japanese tsunamis…But, other earthquakes and tsunamis are always possible from the south!

            I saw an article today on some guy who claims the moon will be closer to the Earth now this month than it has in 18 years, and there is a remote possibility of massive planetary events…Looks like he is not so much of a nut now….

            • says

              Hi Mike – I was thinking the same as what you are thinking… but I found out my thinking was wrong. It doesn’t matter which side of the island you are on, the tsunami will envelope the entire island and can strike the south just as much as it does the north. So, being on the other side of the island is no help.

              • Mike says

                It appears that everyone in all coastal areas of the Philippines needs to have an evacuation plan ready to go at a moment’s notice…Gather important materials like bottled water, clean clothes, etc., and a way to head to higher ground

              • says

                Hi Mike – I think people should have an exit plan whether they live in a coastal area, in the mountains or anywhere in between. It’s a wise step to take.

          • Papa Duck (Randy W.) says

            Bob

            Will be praying for you and hopefully all will be fine for you and your family. It looks like another hit for tourism and foreign investment. Take Care and please be safe.

            • says

              Hi Randy – So far, it is looking like there will be no tsunami… nothing yet, and we are past the time when it was supposed to hit. However, I just saw a report on the local news that there is a wave coming, I guess it has passed some other places… hopefully not too big.

              • sugar says

                Hey Bob, are we ready… for tsunami? I know it’s off topic, but hope you guys are safe and also all the other expats living in province with tsunami warnings. Yay, Phil. coast guard commander being interviewed on cnn.

            • says

              Hi John – Phivolcs is having a press conference right now, and they said that a wave just entered Philippine territory. They said nobody is safe until at least 9pm.

              • John Miele says

                Sounds like local government disconnect again. Fortunately rebecca’s brother started drinking ginebra in the center, so they won’t be going anywhere for a while…. Anything for a fiesta!

  2. Jim Hannah says

    I think you are right on this one Bob, in that the Philippine government cannot reasonably expect a foreign national, traveling on a tourist visa and not resident in the country to file. However, I think they have every right to investigate all residents, foreign or not, to ascertain their income, and satisfy themselves that there are no earnings on which Philippine tax would be due. Not so easy to define some individuals though, and a sorting out of the visa system is what is needed to help with that.

    One thing is almost for sure though, if what is really needed is option A, then they will go for option B!

    • says

      Hi Jim – Remember that article Feyma wrote a couple weeks ago about molestation? As I recall, you made a comment about “innocent until proven guilty”. What about in this case. Nobody should come under investigation unless their is reason to suspect them.

      • Clay says

        Haha, If the government is going to steel……… Ah hmmm…….. I mean take their part of your income, they must first locate it.

          • says

            Bob, lets hope for your sake the tax laws in the RP don’t change the way of the US tax code. I believe that in the US, foreign-earned income is only untaxed up to a certain amount.

          • Matthew says

            Bob, is that because all your businesses are incorporated in the US? how can an American independent contractor avoid Philippine taxes if he is living in the Philippines working remotely for a US business? thanks.

            • says

              Hi Matthew – I do not have any businesses that earn money on Philippine soil. Under Philippine tax law, you must derive the income from the Philippines to be taxed on it.

              • Matthew says

                right on. thanks. any advice for the second question about working over the Internet? that’s my boat.

              • says

                You said “working remotely working for a US company” or something like that. I said “if the money is not derived from the Philippines, there are no taxes.” Seems to me that what I said already answered your question. If you are working for a US company remotely… the money is sourced from the USA, right? There should be no taxes on that.

      • Jim Hannah says

        I do agree with you Bob. I would say that the reason to suspect would be someone apparently residing in the Philippines longer than a typical vacation. Also, in a country which apparently has such a massive tax evasion problem, I suppose they have to be a bit draconian. The assumption of innocence until proven guilty does not preclude investigation though, otherwise no-one could be proven guilty.

          • Jim Hannah says

            Hey Bob, it’s not personal. The system is dysfunctional I know, hugely. My personal opinion is that, yes, a government should be able to say to someone who appears to be resident “…can we please ask, and be convinced, about how you support yourself”? The international money laundering laws make it even more comples than it ever has been before. What is proposed as part of the discussion about this AIR thing is clearly nonsense as it stands, as it does not discriminate it’s target accurately. Tax authorities in both our countries of birth have draconian powers, this having evolved to be so because people somehow seem very keen to avoid paying their taxes. Me too, of course, it’s not personal. But as my accountant always says, “tax avoidance is perfectly legal…tax evasion is not”. And just to state the obvious, just in case, I don’t doubt for a minute that your personal financial affairs are absolutely above board. It’s not personal.

  3. Dwayne says

    What would we do without you Bob. I learn so many things on this site. Thanks for the heads up. Cool article.

    In keeping with my positve posts, I find this another in a long line of really intelligent things this country does to embrace its foreign visitors and resident Aliens. Now that they have gotten a good handle on corruption here and have finally put a complete stop to the feudal system of corrupt governance by generations of the same families that enrich themselves at the expense of their consituients especially provinces like Maguindinao the next logical move would have to be to stop all the crooked foreigners who will stop at nothing to help their inlaws by giving them money to improve their lives. SARCASM of course. I don’t have those smiley things you use….

    I wish the Philippines good luck in their endeavor. It’s truly laughable. There is absolutely no chance this could suceed and how woud they be able to prove anything. Tax evasion is the norm here and I don’t think anything will ever change. I will be very curious to see the outcome of the Armed forces probe to see if even one single person goes to jail. Probably not. If anything, most foreigner will rely on their majority Philippine partners to figue out the best way to deal with this.

    • says

      I wrote this article yesterday, Dwayne, and today on the news (ANC) I saw a report that Congress is going to look into this and see if it should be revised. We can only hope.

  4. Bryan G says

    It gets more bizarre by the day – this is another legal requirement that will go on the statute books but will not be enforced or only selectively enforced. The tax laws that already exist are not enforced to any degree so what are the chances of any new legislation being effective? The problem with tax in the Philippines is the same as with everything else – lack of enforcement of existing laws. I seriously doubt that the BIR has the capacity to monitor the tens of millions of returns that would be made. Congress are going to have another look at it? Probably to see if they can exempt themselves and their rich friends from compliance!!
    I have also seen a report that soon SIM cards will have to be registered – no doubt requiring a fee.What is the point of this – the only places that do this are Middle Eastern autocracies and the like. Read George Orwells book ‘1984’ it will give an insight as to what is the result of all these laws that encroach more and more into peoples lives.

  5. says

    I doubt this will work well. Only those that actually have a business in the Philippines will have anything to fear… as No info from america will be available to the Philippines to find out about anything we are doing or not doing offshore.

  6. sugar says

    Hi Bob- Earlier in the office, I got my 2316 and told gotta file with BIR, shouldn’t they be the one to file the tax? Okay, I know it’s for first time employees they do that… but haay! he he.

      • sugar says

        Bob, 2316 is the Certificate of Compensation Payment/Tax Withheld. Company gives that every year to employees. It has details of the non taxable/exempt compensation income, and then the taxable compensation income regular. I only look at this stuff once every year when they give this to us. It has summary of gross compensation income, taxable and well, all those stuff.

        Are foreigners required to pay taxes if they work for foreign company here? Or is it just just the locals? Sorry for the ignoramus question, just curious. I have an expat manager, and expat boss, and I see other expats in the company.

  7. David L Smith says

    Hi Bob
    I hope you are not close to the coast as they have all been told to evacuate their houses. I assume my family is safe as we are on high ground not to far from the airport..but i have never experienced a tsunami so im not really sure.

    • says

      Hi David – Actually, we are quite close to the coast (although it is not visible from here), thankfully, though, the tsunami did not have the punch that was feared.

  8. brian says

    I would think the annual tax reporting would devulge this, if thier that concerned they should perform audits . Whats the point of redundancy if you don’t enforce one already on the books? Insofar as to include foreingers, I could understand IF they own a business in the RP.
    I see a new tourist slogan: ” Come on vacation…leave on probation” !!!!

  9. says

    And now those holding an SRRV visa will be charged a $500 yearly maintenance fee…..How long before this “maintenance” fee will be applied to those of us with a 13a??

    With this change there seems to be no advantage cost wise to staying here, except on a tourist visa. It seems like a shot in the foot for the government here.

    I could see a minor increase…..but $500??

      • ian says

        Bob- just a few basics re the new SRRV [ not to be confused with the new SMILE program]
        I currently have an SRRV. I have $20,000 usd deposited in a PRA bank account that pays me a net interest per year of about $11. [ I do appreciate that if i changed banks i could get up to $45 a year]
        I pay an annual fee of $10 . I can convert my $20,000 deposit into a condo- costing at least 900,000 [ the peso equivalent of my $20,000 usd]
        But things will change in the next couple of months.
        You can see the changes at:
        http://www.pra.gov.ph/main/srrv_program
        Now under the SRRV [ not the SMILE ] program, my $10 annual fee is going to change to $360 per year.
        And if I want to convert to a condo- it has to be a minimum of $50,000.
        In other words I can still convert, but I have to add at least an extra $30,000 investment to my $20,000 already invested.
        I dont see any reason to continue with my SRRV and intend to just end it, get my money back, and extend my tourist visa every 60 days. And of course I will lose the $1400 usd application fee that I paid to join the SRRV .
        The same thing happened a few years ago in Costa Rica. At first retirees were encouraged with tax incentives, no duties or customs on the imports of many personal items etc.
        But the program became popular so the government removed most of the incentives.
        The Philippines government has now reduced all of the incentives for me to continue with the SRRV program.

        • says

          Hi ian – That’s a pretty lousy thing the way they are changing the SRRV. I mean you came into the program under one set of rules and understandings, and they change it like that! Crazy! It does seem that the new government here is out to get anything they can!

  10. says

    Well simply ridiculous! I love the Philippines but sometimes I feel like the chick in the Exorcist with my head spinning around…that usually happens when I read something like this!

    There are times when I think the Philippine government is totally, and I meant TOTALLY, out to lunch. My God, they need MORE tourism. MORE incentives to bring people to the Philippines….not turn them away.

    Ahhhh, time to get the neck fixed and wait for the next dumbfounding thing the Philippine government will do.

  11. says

    Hi Bob. Scares me & I ain’t scared of anything but Heights & Electricity. I am a Power Lineman. Then basically to be totally complient a foreigner-visitor would have to expose their assets if they were singled out & could be held until they ( paid their ransome ). I like that place, but it is getting more complicated & stressful every year. Immigration & Tax departments have a lot of power, if like our countries. I personally have nothing to hide, as most, but I still don’t want to expose & start explaining my healthy bank account to a Questionable (investigator) that would droul at the numbers. Am I getting carried away? That makes some other places much more appealing, & they advertise for tourists Guy

    • says

      Ha ha… I love it, Guy… a power lineman who is afraid of heights and electricity! Good luck with that, my friend!

      Yes, I think that it is a crazy idea, way out in left field. I also wonder if it is not another avenue toward corruption… “hmm… this guy has a lot of money in the bank… I bet I can get a bribe from him if I hassle him enough!”

    • says

      Guy, I think you’re right on the money regarding the potential for extortion. There is no possibility they could get compliance with this sort of thing from the average Filipino, but as a foreigner it might be quite risky to just ignore it, if it does apply to us. In my case, and I suspect a lot of others including maybe you, one of my main motivations for coming here was to live in a place that’s relatively free from the constant government monitoring of everything we do. I agree with you that if this is true, it would make me start thinking about other places.
      (Also, as for having any effect on corruption — just not credible. The authorities perfectly know already who the corrupt ones are, that isn’t the problem.)
      Jack

  12. ian says

    My first thought when I read this was that the first time I ever file a AIR i will declare that I have 50 million pesos in assets. [ of course most of that would be classified as “wishful thinking” !!] But with all my world wide assets included who is to say if that 25 million pesos debt from my cousin is real or imaginary. The next year I file saying that I only have 49 million- because my cousin and I came to a new agreement. Of course any income that i might have earned in the year would be less than the 1 million decrease in the asset due from my cousin.
    Hope i am making myself clear here. The only way for the government to combat my system would be for them to make me prove the value of everything that i declared up front as an asset . Good luck to them in evaluating what my assets really are.
    Seems to me that this system is way too late to do anything about corruption. If i were a corrupt local i would just do the same thing- way over value my initial assets.

  13. Dan says

    Sounds like a new scam there for corruption Bob.,Maybe in the future the tourists will have to pay a new fee along with the other fees at the air port.Sounds like another idea there that will turn off those that wanted to come to have a look see, but really did not want to feel like they were being held up like they used to be 150 years ago here in the states a lot of the time when they took a stage coach ride.

  14. Dan says

    This next one sounds kinda far out, but I am surprized that they have not come up with a “talk to the Fillipina tax” That would be a tax on all the date sites that feature Fillipina’s in the personal ads. Yes I know that most of if not all of the date sites that feature Fillipina’s are not based in the Phillipines,but as creative as the Phillipine goverment is try to get on comming up with new regulations and taxs sure they would come up with a way.

  15. Hudson says

    Hey Bob,

    So, Big brother has showed up in the Philippines.

    As Bryan mentioned above, How will anybody enforce it? Considering the size of the population, the illiteracy rate, the cost, and the just plain ol’ non-compliance, makes this an impossible task for the Filippino Government. And what if somebody is found guilty of not filing? What if a foriegn national doesn’t file? the worst they can do is send him home.

    • says

      Hi Hudson – Worst they can do is sent him home? What makes you think that? Foreigners are put in jail all the time! It would be no problem for them to put a foreigner in jail for not filing an AIR.

    • says

      Yes, I see Bob already commented on this … but I feel I have to chime in too. Wherever did that ‘worst they can do is send him home’ idea come from?

      Foreigners are thrown in jail regularly in the Philippines … even deported (in some cases) to the wrong country. If you are thinking that Americans get a ‘free pass’ in the Philippines, better think again.

      In fact, although I don’t lay awake at night thinking about this, my biggest fear about living here is not crime or violence against me, it’s that I might piss off the wrong person and be arrested on a trumped up charge. Insulting a Filipino or the Philippine sitself can be a felony, you know.

      Most Philippine trials amount to little more than rumors and innuendo substituting for evidence, but the real problem is, pre-trial confinements of years are common, and many offenses are not ‘bailable’.

      Foreigners have got to live law-abiding, circumspect lives here, or run grave risks … IMO only of course.

  16. Roberto says

    Hi Bob: Sounds like more political buffoonery, in the order of penalizing those who sing the national anthem out of key, this type of AIR needs to be relegated to that area reserved for acute flatulence.

  17. rebecca Ferry says

    Bob,
    How about us OFW’s, do we need to file?This is ridiculus, they should only enforce them to a corrupt gov’t officials coz they’re the one who steal the people’s money and to ask all foreigners (resident’s or not ) to file their income tax in the Philippines is more crazy than i thought..

      • jonathan says

        This is another one of those hush hush policies that our government is rushing to push thru. What’s the point of filing an AIR if there’s already an Annual Income Tax return? Can’t they just revise the current format to add those information that they need? Isn’t a private individual can be an OFW too? So, if ever they would include OFWs what will be the point of it all? OFWs are income tax free as mandated by law and if they have their own business locally an income tax return is required for that business. This policy is so vague, BIR have to refine it first before they require people to submit it next year otherwise it would be just a another waste of time and resources for everybody. The Congress should really scrutinize this. If this suggestion from the BIR stemmed out of the recent commitee hearings on the AFP scandal where “witnesses” tend to forget a lot of things, I think what our lawmakers should do is to require all those people summoned in the hearings to have them checked and certified by a doctor first and clear them of any illness like AMNESIA and HIGH BLOOD PRESSURE before they present themselves. In this way, they won’t be able to develop these diseases almost immediately at the onset of the hearings, geez.

        • says

          Hi jonathan – It doesn’t appear to be very hush hush, because they are talking about it in the media and such. Income tax return shows how much money you made. AIR will show how many assets you have – two different things.

          • jonathan says

            I agree that assets and income are two different things but similar in nature Bob and that is where the grey area comes in. BIR have to define what type of assets they want a private individual to declare and for what purpose, is it to know the person’s net worth? If that is the case the better option is to require individuals to file a SALN because declaring your assets without the liabilities is totally wrong.

              • jonathan says

                That is exactly my point Bob, why call it with the dubious title of AIR and not a clear cut title like SALN? In accounting procedure SALN is just a balance sheet and the private business sector are required to do this for auditing procedures. Now, if they require it on a personal private individual level the BIR is circumnavigating the constitution because there is no such law for private individuals to do that for whatever title they may deem call it. Congress should legislate a law first then the BIR would implement it. The BIR’s National Internal Revenue Code itself did not explicitly require private individuals to do that. That’s the reason why I called it a hus-hush policy and borderline unconstitutional. Similarly, India has the same requirement called, surprise suprise, AIR! But unlike the Philippines it is explicitly mentioned in their constitution under section 285BA of their Income Tax Act of 1961.

              • says

                Hi jonathan – the name that they use – SALN or AIR – is really of little concern to me personally. The affect of it is of concern. :grin:

  18. Dave Keiser says

    As a foreigner I am not allowed to own anything, no house, no land, no business. My wife is the owner of our business, I am just a freeloading bum that she feeds out of the generousity of her heart. In exchange for food, and a roof over my head, I fix laundry machines, manage employees, pay all the bills, and file all her tax forms with BIR, meet and greet customers, etc. Again all out of the generousity of MY heart.
    Now…..how is it that I am supposed to have money to report??????
    Is my secret, dollar based, emergency stash supposed to be made public knowledge as well?
    I think BIR will be hearing a lot of my mother’s favorite saying……”They can kiss my royal #$%!” And if they expat is an Aussie, it will be followed by the ever prevelent word “Mate”.

      • rebecca Ferry says

        Bob,
        Hahahaha! I can’t help but laught about this , if this is the case then i think all of you expats are thankful today that you never own any assets/properties in the Philippines coz you don’t need to file to report anything to the BIR, it’s your turn to let the gov’t suffer to look into your stashed asset somewhere….. hahaha!! just kidding…

  19. chris says

    Hi bob let me get this right ,if i come over for say a month or 6 if i help aunty with her groceries and some utilites then i have to fill out an air ,i have to list my assets evenb though they are in another country and i would be getting a pension from my government ,i think i have missed something in the reading its non of there bloody buisness what assets i have in another country,although they might have learned this from australia as when filing your tax return you must declare if you have land or property in another country ,i dont know what they do about it (will find out this year) but the same applies what buisness is it of the ausie governemnt if i own 6 camels in arabia and 10 water buffalo in mindanoa ,buerocracy gone mad almost sound s like “SHOW US THE MONEY” crazy!
    chris

  20. Neil says

    Hi Bob
    The AIR is intended for people making 500,000 pesos a year and would force people who may make their money in passive investments like bank time deposits, even if the bank withholds 20% for taxes anyway to report this. I know some congressman like the one from CDO city and his brother and now the Senate are questioning this. The banks aren’t ready for this and it would make a complicated tax system even more complicated. I hope they force the BIR commissioner to change course and let this one drop. The BIR needs to enforce what they have on the books before they put even more cumbersome rules out there that might hurt future investments, business or people relocating there.

  21. Ricardo Sumilang says

    So, as a holder of both U.S. and Philippine passports (dual citizen), I suppose I will have to file AIR, too? Pray tell, what business is it of the Philippine government to know what my assets are in the United States? LOL AIR was obviously enacted to deter corruption, but since it would be illegal to apply the law only to thieving politicians, Congress had to make it applicable to every Filipino? Lots of luck!

    • says

      Also, sad to say, you have to tell the US government about foreign holdings as well … the law has been on the books for years but this year the US IRS is going to start criminal enforcement actions against US citizens who fail to declare foreign assets.

      One thing to roll around in your mind on this … every foreigner who has a bank account here is already paying tax on his/her interest, and under the tax treaties with the US, the Philippines ‘might’ be asked to report this to the US government … the law is already there, so it just depends on how the US decies to enforce it.

      The US treadury Departmnent has unrestriucted access to _all_ ATM transaction and money transfer actions between the US and the Philippines, so don’t think you can hide by merely living off your US ATM card.

      Many Americans seem to think they are flying ‘under the radar’, when, in fact, they are not.

      Foreigners are allowed to own many assets in the Philippines including bank accounts, stocks and bonds and in places like the Special Economic Zones, businesses.

      I’m against the whole AIR program myself, but I can assure you that it’s not only about trivial things … a lot of foreign assets are here in the Philippines, some, perhaps unreported.

  22. says

    Bob:

    A friend and I were discussing this last night and we reached a conclusion that no-one on here has commented about yet.

    It is correct that since you cannot own land here and only limited business ownership, you, me, and other expats living here but not doing business that for most expats, this is more of an intrusion issue than an issue of taxation.

    However, for everyone married to Filipinos, there are the provisions of marriage law that must be examined and a fundamental point is this: When you are married, both parties’ assets are effectively community property. So, even if your name is not on a land title or as business owner, that asset effectively is shared in your household through your spouse. You may not be able to legally own it, but it is still an asset. Should this be reported? That is an interesting question. If the forms are audited and enforcement tied through ACR issuance, foreigners who either don’t report or misreport could be in for a whole lot of trouble.

    What is interesting is that when looked at from this angle, it is not the foreigners, per se, that the government is targeting. It is the spouses of the foreigners who use that “foreign source” income to buy land, business, etc. for the spouse or the spouse’s family who do not report these assets to the BIR, subjecting them to taxation. I know that most of Rebecca’s family have rarely filled out tax returns since they were either OFWs or not traditionally “employed”, thus owing little, if anything, to the BIR.

    However, so much is made over the issue of OFW remittances, that are not taxed as overseas income, but when spent here by family, remain untaxed. Yes, the OFW personally is receiving foreign source, but the family to whom that money is remitted “earned” that money “domestically”.

    The other thing that appears to be happening is that this is intended to further restrict money laundering. Remember that about two years ago, the Philippines was specifically named by the US as one of the countries contributing to tax fraud, evasion and money laundering… All under the “anti-terrorism” moniker. It is not beyond the realm of possibility that the congress here is reacting to US or EU pressure on that front.

    • says

      You hit it John! I was thinking this since the beginning and waiting to see if anybody would say it. I believe what they are really doing is trying to please the US Government. The US government as been after the Philippines for money laundering and such for a long time, and lately the PHL has started making moves to try to curb that.

      • says

        Bob:

        Effectively, if US citizens are filling in their US taxes as they are supposed to do anyway, a copy of the US tax return should suffice with the BIR, since it is based on global income… So if proof is demanded, then fine… You have it. It would not surprise me, though, if the IRS started to demand the AIR as a supporting document on the schedule where you are supposed to list foreign assets. You may not like it, but what are you going to do? Not much you can do if you want to stay legal.

        Personally, I believe that the BIR lacks the resources to chase people outside of RP borders and verify foreign assets. Assets here are a different story, though. So, we will just need to comply, fill in their form, and like everything else, if you don’t like it, then tough.

        As to the US end, we never even requested a tax ID for Rebecca. Why? Because she does not want a green card, we live here, I own nothing of value here that the IRS wants to know about, and my Korean salary is reported. I’ve always filed as an individual, though once Juanito is finished with paperwork, we will probably apply for a tax ID for Rebecca so that I can claim them as two deductions (and Juanito will need a SSN and a tax return once he becomes a citizen).

        • says

          Hi John – US Tax returns only show income. BIR’s AIR is not looking for income, it is looking at assets, liabilities and net worth, so I don’t think a tax return would suffice. I hope that the Congress throws this out, as it appears that they may.

        • says

          A good point about property ownership, John. Many Americans ignore the fact that although we can not own land, ‘in fee simple’, a great many of us are part owners of many assets in the Philippines.

          Another aspect of this whole issue is, to me, deja vu all over again. I worked for many years for the US government, at a relatively modest level, yet I had to file a rather voluminous “SLAN” type report every year, just becuase I was a ‘Fed’. Many of my tears I also had to file other, duplicative reports because I was in a position where I administered government contracts.

          The Philippines often copies US government actions almost letter by letter, even when the meaning of the letters is unclear ;-) (Example, the common term in the Philippines for an employment record is a ‘201 file’, a designation direct from an old US Army term for a soldier’s personnel records ‘jacket’.

  23. John says

    Hello Bob, I just skimmed the comments, but I didn’t notice anyone mention thatdoes the government expect corrupt officials to be stupid enough to report their actual assets? On top of that does the government have the means to conduct through investigations of it’s own citizens, much less investigations of foriegn individuals? John

    • says

      Hi John – I agree that it would not be expected for officials to be honest on their SALN reports. But, those things are used to jail corrupt officials. When they catch somebody who is skimming, they look at what assets they have, then compare it to their last SALN, and they catch them that way.

  24. jonathan says

    Well, IMHO Bob, this will not prosper and will be placed into the back burner so there’s no need for concern about its effects. :)

  25. says

    I think you didn’t read the article.. there is no “how much”. Nothing to be taxed. Just a statement of assets, liabilities and net worth. Statement.. no payment as far as I know.

  26. David L Smith says

    Hi Bob
    I think many foreigners married to a filipina have to combat the culture over here of not paying taxes or declaring their assets. Most people living here for a long time have been victims of decades of corruption by the goverments so its hardly surprising that they are reluctant to give them 1 peso more then they have to. Now a large percentage of foreigners have come from countrys where tax evasion is a serious crime and therefore do their tax returns and declare their income/ assets every yr….Trouble is now the way i see it is that a lot of phil spouses will advise their partners not to declare taxes or assets that they have over here because thats the way we do things and would sooner spend the money on something else. Even if you technically dont own anything over here your name still goes down on the title deeds as husband of the owner, so i would assume its classed as an asset through marriage….I can see many foreigners getting implicated because their spouses(the real owner) of the land, farm, business, house, decides no taxes or assets need to be declared.

    • says

      Hi David – The key is, though, that no taxes would be due here unless income is earned here. For most expats, we don’t actually earn any income in the Philippines, and thus owe no taxes here.

      • David L Smith says

        Hi Bob
        That actually surprises me because a lot of ex-pats i have spoken to on my trips to Davao have told me about income they are getting from condo’s , farms ect…I myself own a small farm (in wifes name) that produces rice for our family and provides a small income. But i am not doubting you as you have lived in Davao a lot longer then i have, as i say just a little surprised.

        • says

          Oh, I am not saying that no expats make money here… I am saying most don’t. Sure, lots of expats have condos or other income making things… but not ‘most’.

  27. Neil says

    Hi Bob
    The BIR commissioner states that the income that is to be reported in AIR won’t affect anyone’s taxes because all the taxes are withheld at point of earning and that the intent “is to get the whole picture”. The BIR wants to know your assets are, this is what it comes down to.

    • says

      Hi Neil – Yeah, you might have misinterpreted my article, because I never said that the AIR had anything to do with taxes. It has to do with reporting of assets, nothing more.

      • Neil says

        Hi Bob
        Yes
        If government wants to know what your assets are they should file all the necessary paperwork to the proper authorities to gain that information.

      • Ricardo Sumilang says

        Bob, you said, according to the law, I, as a dual citizen, still have to file an AIR even if I don’t live in the Philippines. OK, so I file my AIR in 2010 and declared very little or no assets. However, in 2011, I win the top prize in the multi-state Powerball lottery, and reported a million-fold jump in my assets the following year. However, all the assets are located in the U.S. – none in the Philippines. Pursuant to the stated intent of the AIR, this huge jump in my assets would trigger an investigation by the BIR, right? So, after an investigation, they find that the newly-acquired assets are legitimate, what then, Bob? Is the BIR going to tax me – a U.S. resident – for legitimate assets located in the States? Would the BIR want to have a piece of my USA pie, or does the investigation (ascertaining the reason for the big jump in assets) end there?

        On the other side of the coin, let’s just supposed that the newly acquired assets were ill-gotten. I, of course, would not be stupid enough to report the new assets in my AIR filing, but how is the BIR going to know if I am being truthful in my AIR? If, by chance, the BIR discovers that my annual income in the States does not jive with the huge jump in my assets the following year and concludes that they were obtained illegally. The legal question is, would the Philippines have jurisdiction over me for an illegal act committed in the U.S.? Of course not. If not, then what is the purpose of requiring dual citizens who do not live in the Philippines to file the AIR?

        • Papa Duck (Randy W.) says

          Ricardo

          I wouldn’t even worry about it. I don’t think they have the means to enforce it. You are a US citizen living in the US so i really don’t think they have the authority to go after you. So if you win the Mega Powerball just remember me hahaha. By the way its 67 million now. Take care my friend.

          • Ricardo Sumilang says

            Randy, a while back, I read about a Philippine Navy corvette on a drug interdiction mission in the Sulu sea trying to intercept a drug-laden fast boat, but the corvette – a U.S. surplus reject – was so old, it kept breaking down. It finally gave up the chase. Can you imagine how embarassed the Philippine Navy must have been over the image of pirates whooping it up as they sped past the disabled corvette bobbing up and down in the water? LOL So, you’re right, if the Philippine government can’t even police their own backyard, how can they be taken seriously to go after a small operator like me who lives offshore, right? To be honest, I’m not as concerned as I sounded. Just trying to point out some possible flaws in an otherwise well-meaning legislation to combat graft and corruption in the country.

        • says

          Hi Ricardo – I believe you would only be liable to file an AIR if you come to the Philippines, but I am not an expert or an attorney, so please only accept what I say as the view of a layman.

  28. Fred says

    This is an absolutely brilliant move, like so many others.

    So the old lady, maybe senior citizen type, who sits outside the cemetery, selling candles. Who more than likely cannot read or write, an only speaks the local dialect. She is going to file an AIR!!!
    GIVE ME A BREAK!!

    Reminds me of last August or September, an environmental group, tried to give a petition to PNOY to stop building COAL Fired power plants.

    The presidential spokesperson, said there was NO ALTERNATIVE to coal fired plants.

    There are 2 TURBINE NATURAL GAS fired power plants in Batangas City about 1.5 hours, south of Manila. They each produce about 700 Mega Watts of power. The natural gas comes from a natural gas field west of Palawan, that is owned by the Philippines, it is shipped by pipeline 450 kilometer to Batangas City. The Philippines is also building a re-gasification plant. Why?? The natural gas field has an estimated 3.5 Trillion Cubic Feet(tcf). Maybe even more, up t0 19(tcf)!!! And about 40 million barrels of recoverable oil.

    Not one reporter challenged him!! Nor have I seen any followup’s.

    So do not expect any coherent reporting, on any subject.

  29. Mark G. says

    So now I have to report my assets to the Philippine Gov’t.? I don’t even do that to the US Gov’t…Does any money I give to the Missus and her family that may increase (even temporarily) thier assets trigger an investigation? Oy…Who’s idea was this? The crooks will lie like always and the common folk will ignore it. Nothing will become of it except for us expats who have something new to worry about. There needs to be a clear cut explanation of exactly what details they want and better yet why I should feel obligated to tell them. Maybe it is a US Gov’t. driven initiative, i.e. too much money is leaving the country with the retirees who can’t afford to live there anymore so Uncle Sam wants a hand tracking it down! lol

    • says

      Hi Mark – You would only have to report if you live here, or if you travel here and have a business interest in the country. It sure will be a hassle, though, and I personally do not agree with it.

  30. Neil says

    Hi Bob
    I just read today that BIR commissioner Kim Henares will withdrawal her proposed AIR to the Finance chief. So hopefully this will indicate that the proposed AIR is dead.

  31. Craig says

    To me it looks like a very simple way for the govt to ask everyone in the Phils… “Hey, how much things you own.” And the only type of people who will answer are the ones who have some money, and do not want to risk problems with the govt. It seems a perfect way for any corrupt officials to make the prey come to the hunters. And easier to see what the hunters can easily take from them. Cause they now know what you own.

    Also can be something the govt doesn’t even care about enforcing, unless they WANT to use it to get a person they want. Kind of like in the USA.. Al Cap0ne going to jail for Tax evasion. Just have another law on the books that they can force in situations that they want to. Used as a very large leverage (if needed) to an individual.

      • Craig says

        Sorry if i didn’t type it correctly for what i ment. Did not intent to say Corrupt officials was the reason for AIR. Was just saying, it appears to be a perfect thing for corrupt officials to use to there advantage.

  32. John H says

    Hey I don’t have time to read all the comments but my first thought was. Um we know many government officials are corrupt so to solve the problem we are giving them more power?

    Let me give an example their is a city not to far from here where the mayor is well known for being a criminal in charge of much of the crime in the area (not where I live the mayor here seems to be rather good). I haven’t heard that he is directly involved with the threats and kidnappings but it is likely from what I am told. Much of this is aimed at foreigners children too. What do you think he will do with this info?

    Do you really think that everyone that will have this info will be honest enough not to take a nice bribe for the lists? You know its just a piece of paper after all. I submit that any criminal racket in the country will be able to buy ANYONE’S information. This might not have been a problem for politicians who have a lot of power but its much different for those who don’t for example foreigners with practically no rights to begin with.

    Of course this is supposed to stop corruption. I think it will make it much worse. I think you need too clean up law enforcement of all types before you can think of doing things like this.

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