Philippines: Foreign Workers Must Have Taxpayer Identification Numbers

At a Glance

• Following the latest joint guidelines from the Philippine government, all foreign nationals must have a Taxpayer Identification Number (TIN) from the Bureau of Internal Revenue in order to work in the Philippines.
• This rule applies to all work visa applicants (short-term and long-term), and foreign nationals engaged in a trade or business, or in the practice of a regulated profession.
• Obtaining a TIN prior to the AEP or work visa application adds an additional step to the work authorization process and can lead to delays in work ready dates. Employers should plan to file their applications ahead of time to avoid potential issues in the deployment of their foreign employees.

The situation

Following the latest joint guidelines from the Philippine government, all foreign nationals must now obtain a Taxpayer Identification Number (TIN) from the Bureau of Internal Revenue (BIR) to work in the Philippines. Previously, Special Work Permit (SWP) applicants whose salaries were paid in their home country were exempt from this requirement.

A closer look

• Who will need to obtain a TIN? All work visa applicants (short-term and long-term) must now have a TIN to work in the Philippines. This includes foreign nationals engaged in a trade or business or in the practice of a regulated profession.
• Application details. The applicant’s employer must obtain a TIN from the Revenue District Office with jurisdiction over the employer’s address, or the self-employed foreign national’s place of business or residence. The BIR takes approximately seven business days to process an application for a TIN.
• TIN as prerequisite to AEP. The Department of Labor and Employment (DOLE) has also advised that Alien Employment Permit (AEP) applicants must obtain a TIN at the latest 10 days after they start working. Though the DOLE is still accepting AEP applications without a TIN, applicants are being required to submit their TINs before their AEP cards can be issued. This lenient practice is expected to become stricter in the near future.

Impact

• Additional step can lead to delays. Obtaining a TIN prior to the AEP or work visa application adds an additional step to the work authorization process and can lead to delays in work ready dates. Employers should plan to file their applications ahead of time to avoid potential issues in the deployment of their foreign employees.
• Noncompliance risks not yet clear. The government agencies in the Philippines have not yet outlined fines or penalties associated with noncompliance with this new rule, though it is possible that these may be published in the future.
• Pending SWP applications. Currently, foreign nationals with pending SWP applications do not need to obtain a TIN.
• Current SWP holders without a TIN. Currently, foreign nationals who previously fell under the exemption and were granted SWPs without a TIN do not need to obtain one.

Background

The new rule is intended to ensure that all foreign workers are paying their taxes on income earned in the Philippines. This comes after a recent discovery that many foreign nationals under SWP status were not paying income taxes, resulting in a loss in potential revenue in billions of pesos.

Looking ahead

The close coordination between the DOLE, BI, BIR and other concerned agencies is expected to result in additional rules and procedures that further restrict the regulation of foreign nationals entering and working in the Philippines.

However, this combined effort may improve inter-agency coordination and streamline the work authorization process.

Fragomen is closely monitoring the situation and will report on relevant developments, including if penalties for noncompliance with this rule are published.