Taxes and Concerns

Today, I got an e-mail from Mike.  Mike is now a US Citizen, but also recently re-acquired his Philippine Citizenship as well.  He has a few concerns.

Let’s have a look:

Hello Bob,

I am living in the U.S. right now but personal circumstances are forcing me to live back in the Philippines, and I might stay there for a long period of time. I have a dual citizenship, and you did mentioned that if a person has both American and Philippine citizenship, he can stay in the Philippines for as long as he wants without loosing his U.S. citizenship. I have a couple of concerns; first: Technically I am still a U.S. citizen, so do I need to pay taxes to the American government while living in the Philippines even if I have Philippine citizenship too? I heard U.S. citizens living outside the U.S. are being burdened with taxes owed to the U.S. gov. Second, lets say I stayed in the Philippines for 10 years and decide to come back to the U.S., will I have problems with immigration officials at my port of entry since I stayed outside the U.S. for a very long time?

Thank you Bob, I will very much appreciate your advice and assistance. Sincerely, Mike

Hi Mike,

Mindanao Bob Total Package
Mike

Mike

Nice to hear from you.  Let’s have a look at your questions.

You are correct that if a person is a Dual Citizen of the USA and the Philippines, he can stay in the Philippines or in the USA as long as he wants to stay.  He can never be denied entry into either country, no longer how long he has been gone.  As a citizen of the country, you are always welcome there!

As for taxes, yes, you will always be liable for US taxes, as long as you are a US citizen.  The United States is one of the few countries that taxes worldwide income.  It does not matter where you earn the money, or where you live.  If you are a US Citizen, you must pay US taxes on the money you earn.

You will always be allowed to enter the USA, since you are a citizen.  Well you have trouble?  Not really.  The immigration officials may ask you some questions, like why you left the US for so long, what you have been doing abroad and such, but in the end, they must allow you entry, because you are a citizen.

Take care, Mike!

Comments

  1. GunnyD says

    It was my understanding that you only owe US taxes on income earned from the US or a US company operating a business in the foreign country but still based in the US. If you were to earn income in the Philippines from your own business in the Philippines or a domestic company you would only owe tax on that to the Philippine government and not countries.

      • GunnyD says

        Well thanks for getting me straightened out on that. So, to make sure I understand this, say my dual citizen wife earns income in the Philippines will she owe taxes to both the US and the Philippine governments?

        • says

          Yes, she must report the income in both the Philippines and the USA. Generally, she will get a credit on her US taxes for her Philippine tax burden, but not in all cases.

          • Ron says

            As a very general statement you only have to report taxes in the Philippines to BIR if you have lived in the Philippines for more than 183 collective days in a year. This applies to all income earned inside and outside the Philippines from Philippine or international sources. Make sure you understand the BIR rules as well as the IRS rules; there are a few more restrictions to this BIR tax law.

      • Miss August says

        Hmmm… you might want to look into this information.
        http://www.irs.gov/businesses/small/international/article/0,,id=96817,00.html
        If you meet the requirements, you don’t have to pay taxes for foreign earned income up to $95,000.

        My husband and I looked into this, he’s eligible to retire next year and there’s a possibility that he’ll work for two years in Abu Dhabi. A certified accountant friend told us the same thing.

  2. GunnyD says

    So, once we move to the Philippines, will I have any requirement to report my income from US sources (retirements) to Philippines BIR? I do not anticipate having any earnings from Philippines sources.

    • says

      If you are not a Philippine Citizen, and earn your income from outside the Philippines, it is not taxed by the Philippines, and you have no obligation to report the income to the BIR.

  3. says

    I Agree. I am a US Citizen only and for 18 months I lived in Cebu (Philippines), during that time I earned about 30k from a business I ran there. I also earned 50k from my business in the US. The 30k I earned was NOT taxed by the US because it was below the $95k limit. I still needed to pay tax on the 50k. When I go back I plan to earn more than $95k so I will likely need to pay taxes to the US.

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