House Ways and Means Committee chairman Joey Sarte Salceda instructed the Bureau of Internal Revenue to study the use of Philippine tax rates on the incomes of Filipinos working with clients in the United States.
This is also instead of the 30 percent withholding tax rate charged to them in America.
If Salceda’s proposal goes ahead, among the beneficiaries will be Youtube influencers and Amazon virtual assistances, which are charged by buses under the Federal Withholding Tax for Foreign Nationals, which will amount to 30 percent.
Salceda asserted that this is too large compared to the Philippine Final Withholding Tax of up to 20 percent.
What often happens, he said, is that a foreign national is subject to federal withholding tax on its income in America at the standard flat rate of 30 percent, and there will only be a reduced rate if there is a tax treaty between the foreign national’s country and the United States.
He said based on the US Internal Revenue Service, when a foreign national qualifies for exemption due to tax treaty benefits, almost no withholding tax will be levied on their income.
But a foreign national must have a US tax identification number to get this benefit.
That is why Salceda is studying with the BIR whether the Multilateral Convention on Mutual Administrative Assistance in Tax Matters will be sufficient for the tax treaty.
He said this is only possible if the Senate ratifies such an agreement.
He also said that it is a challenge to the next Finance secretary to promote tax treaties like this
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