Filipino remote workers living and working in the Philippines are foreign contractors. They’re not in the US. They’re not US citizens or residents.
This changes everything from a tax perspective.
The IRS doesn’t require you to issue Form 1099-NEC to foreign contractors performing services entirely outside the United States.
Even if you’re paying them $50,000 a year.
Form 1099-NEC is only for US-based service providers or US persons. Your Filipino remote worker doesn’t fit that category.
You also don’t need to withhold any US taxes. No FICA. No Social Security. No Medicare.
None of that applies because the work is happening overseas.
This is why thousands of US companies have been hiring Filipino remote workers for years without tax complications.
What You Actually Need From Your Filipino Worker
The One Essential Form: W-8BEN
You should collect one form upfront: Form W-8BEN.
This is the Certificate of Foreign Status. Your Filipino worker fills it out and gives it to you.
It’s their way of saying “I’m not a US person, I’m working from the Philippines, and you don’t need to withhold US taxes from my payments.”
Keep this form in your records. It protects you if the IRS ever asks why you didn’t withhold taxes or issue a 1099.
The W-8BEN is valid for three years. After that, get a new one.
That’s it. That’s the only US tax form you need from them in most cases.
The Rare Exception: Form 1042-S
There’s one situation where you might need to file something.
If any portion of the income you’re paying is considered “US-sourced income” subject to withholding, you’d file Form 1042-S. This reports any tax you withheld.
But here’s the thing.
Most work Filipino remote workers do isn’t US-sourced income.
US-sourced income usually means things like royalties, dividends, or specific types of business income with a US connection.
Services performed entirely from the Philippines? Not US-sourced.
So for 95% of people reading this, Form 1042-S doesn’t apply.
If you think it might apply to your situation, talk to a CPA. But most likely, you’re fine.
What About Payroll Taxes?
You’re not paying payroll taxes.
Filipino contractors handle their own taxes in the Philippines. You’re just paying them for services, like you’d pay any other business vendor.
No W-2 forms. No payroll withholding. No employer portion of Social Security.
This is one of the biggest advantages of hiring international contractors. You avoid the entire US payroll system.
If You’re in the UK
Simpler Requirements for UK Employers
UK employers have it even simpler.
There’s no equivalent to the 1099 for overseas contractors. You don’t file anything with HMRC about your Filipino remote workers.
Just make sure your contract clearly states they’re self-employed and providing services from the Philippines. That’s your documentation.
You deduct what you pay them as a business expense. They handle their Philippine taxes. Done.
IR35 Considerations
The only thing to watch is IR35, but that rarely applies to genuine overseas contractors. If they’re working from Manila, setting their own hours, and working for multiple clients, there’s no IR35 issue.
If You’re in Australia
Australian Employer Requirements
Australian employers also have minimal requirements.
No Tax File Number needed from your Filipino worker. No PAYG withholding because the work is performed offshore.
Your contract should specify they’re an independent contractor working from the Philippines. Keep invoices from them.
Tax Deductions and Reporting
Deduct the payments as a business expense. Your Filipino worker deals with the Bureau of Internal Revenue in the Philippines.
The ATO doesn’t require you to report foreign contractor payments through Single Touch Payroll.
What Your Filipino Worker Needs to Handle
Philippine Tax Registration
Your Filipino remote worker has their own tax obligations in the Philippines.
They need to register with the Bureau of Internal Revenue (BIR) and get a Tax Identification Number (TIN). If they’re earning more than $4,500 USD per year, registration is mandatory.
Filing Requirements
They’ll file quarterly and annual income tax returns using BIR Form 1701 or 1701A. Philippine income tax rates range from 8% to 32% depending on income level.
Optional Withholding Certificate (BIR Form 2307)
Some Filipino contractors will ask you to issue BIR Form 2307, which is a certificate of withholding. This is optional from your perspective. It helps them with their Philippine taxes, but it’s not required by US, UK, or Australian law.
If they ask for it, you can provide it. If not, they can still file their taxes without it.
The important thing is that their tax compliance is their responsibility, not yours. You’re paying them gross amounts. They handle the rest.
What Is Permanent Establishment?
Here’s something that matters if you’re scaling up.
If you create a “permanent establishment” in the Philippines, you could trigger Philippine corporate tax obligations.
This happens if the Philippine government decides you’re essentially operating a business there.
How to Avoid PE Risk
How do you avoid this? Don’t set up a physical office in the Philippines. Don’t give your contractors so much control that they’re essentially running a branch of your business.
Keep the relationship clearly contractor-based.
They work from their own location, use their own equipment, set their own hours (within reason), and ideally work for other clients too.
The Contractor vs Employee Question
Why Classification Matters
This is critical.
Everything I’ve written assumes your Filipino worker is genuinely a contractor, not an employee.
The difference matters. A lot.
Key Differences Between Contractors and Employees
Contractors:
Control how they do the work
Can work for multiple clients
Provide their own tools and equipment
Run their own business
Employees:
Work set hours
You control how they do their work
Work only for you
You provide the tools
The Risk of Misclassification
If you’re treating someone like an employee but calling them a contractor, you’re taking on risk. Not just in the US, but potentially in the Philippines too under their labor laws.
The classification needs to match the reality of the relationship.
If you want someone working 40 hours per week, exclusively for you, following your processes exactly, that starts looking like employment. And employment comes with different obligations.
What You Can Deduct on Your Taxes
Everything you pay your Filipino contractors is a deductible business expense.
The full amount. Including any transfer fees you pay.
Required Documentation
Keep good records:
Invoices from your contractors
Payment confirmations
Contracts showing the scope of work
How to Report on Your Tax Returns
If you’re a US sole proprietor, this goes on your Schedule C. If you’re a corporation, it’s a business expense on your 1120.
UK businesses deduct it against corporation tax or income tax depending on your structure.
Australian businesses claim it as a standard business expense.
This is one of the financial benefits of hiring Filipino remote workers. You get high-quality work at competitive rates, and the full cost is tax-deductible.
Final Thoughts
For most US, UK, and Australian businesses hiring Filipino remote workers as contractors:
You don’t file US tax forms for them (except keeping their W-8BEN)
You don’t withhold taxes
You don’t deal with payroll
You pay them, get an invoice, and deduct it as a business expense
They handle their Philippine taxes
It’s simpler than hiring locally in most cases.
The key is keeping the contractor relationship genuine and documented:
Clear contracts
Regular invoices
Payments through traceable methods
The tax forms you need when hiring Filipino remote workers are minimal. That’s the point. That’s why it works.
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