For many overseas Filipino workers (OFWs), choosing a country with favorable tax conditions is crucial. While the UAE is a popular destination due to its tax-friendly policies, other countries also offer significant tax advantages that can help maximize earnings. Here are four destinations where OFWs can benefit from such favorable tax environments.
- Singapore
Singapore is known for its efficient tax system, which offers benefits to both residents and non-residents. Personal income tax rates are progressive, ranging from 0% to 24%. Foreigners who have stayed or worked in Singapore for at least 183 days in a year are considered tax residents and can take advantage of various tax reliefs and deductions.
Non-residents are taxed at a flat rate of 15% or at the progressive resident rates, whichever is higher, and do not qualify for tax reliefs. Short-term workers, those who work in Singapore for less than 60 days, are generally exempt from income tax, making it an attractive option for temporary OFWs.
- Hong Kong
Hong Kong’s tax system is based on a territorial principle, which means only income earned within the region is subject to tax. This approach benefits OFWs whose income is sourced from within Hong Kong. The region imposes three types of income taxes: salary, profits, and property.
For OFWs, salaries tax is levied on net chargeable income at progressive rates ranging from 2% to 17%, or at a flat rate of 15% on assessable income after personal deductions, whichever results in a lower tax bill. This system ensures that OFWs are not overburdened by high taxes on their earnings.
- Bahrain
Bahrain stands out as one of the most tax-friendly destinations due to its zero personal income tax policy. Both locals and expatriates, including OFWs, enjoy this benefit, making Bahrain an attractive destination for maximizing take-home pay.
Since January 2019, Bahrain has implemented a Value Added Tax (VAT) system, which applies to most goods and services at a standard rate of 10% since January 2022. OFWs are also required to contribute to the Social Insurance Organization (SIO), similar to the Philippines’ Social Security System (SSS). Despite these contributions, the absence of personal income tax remains a significant advantage.
- Switzerland
Switzerland offers a structured yet beneficial tax environment for foreign workers. Personal income tax is levied at federal, cantonal, and municipal levels, with federal tax rates being progressive. Some cantons have introduced flat rate taxation.
OFWs who are tax residents in Switzerland are taxed on their worldwide income and wealth, whereas non-residents are taxed only on Swiss-sourced income. Foreign workers without a Swiss C permit (equivalent to permanent residency) must pay tax at source, which is deducted directly from their salary by their employers. Despite the multi-layered tax system, the structured deductions make Switzerland a viable option for OFWs.
Note: The information in this article is based on a report from GMA Integrated News.