Philippines-US treaty: status and key articles
The Philippines-US tax convention has been in force since 1982. Compared to most modern bilateral treaties, the rates under this treaty are less competitive, reflecting its older negotiated structure.
- Article 7 (Business Profits): Philippine-resident operating profits are taxable only in the Philippines without US PE.
- Article 10 (Dividends): 20% for 10%+ ownership. 25% standard.
- Article 11 (Interest): 10% on portfolio interest.
- Article 12 (Royalties): 15% under the treaty.
- Article 23 (Relief from Double Taxation): Philippine FTC mechanism.
Withholding rates by income type for Philippine residents
| Income type | Default US rate | Philippines treaty rate |
|---|---|---|
| US-source dividends (10%+ ownership) | 30% | 20% |
| US-source dividends (standard) | 30% | 25% |
| US-source portfolio interest | 30% | 10% |
| US-source royalties | 30% | 15% |
| Business profits without US PE | Generally not taxed | Generally not taxed |
How the BIR treats US LLC income
Philippines' Bureau of Internal Revenue (BIR) generally treats US single-member LLCs as transparent for Philippine tax purposes. LLC operating income flows through to your annual Philippine income tax return (ITR) and is taxed at progressive rates.
Filipino founders running BPO, agency, freelance, or content businesses through Wyoming LLCs typically have zero US federal tax (Article 7 protection on operating income) and standard Philippine income tax on the pass-through.
How to file W-8BEN-E from the Philippines
- Line 1: LLC legal name
- Line 4: Chapter 3 status: Disregarded Entity
- Line 5: Country of residence: Philippines
- Line 6: Permanent residence address in the Philippines
- Line 8: US TIN (EIN)
- Line 9: Foreign TIN (your Philippine TIN)
- Part III: claim treaty benefits citing the applicable article
Common mistakes by Filipino founders
- Expecting modern-treaty rates (PH-US treaty is less generous)
- Not filing W-8BEN-E with US payers (30% default applies)
- Missing Form 5472 + 1120 ($25K penalty)
- Not declaring LLC income on Philippine ITR
- Missing VAT registration if selling digital services to Philippine consumers