REVENUE REGULATIONS NO. 1-2011 issued on February 24, 2011 defines the tax treatment of income earnings and money remittances of an Overseas Contract Worker (OCW) or Overseas Filipino Worker (OFW). An OCW or OFW’s income arising out of his overseas employment is exempt from Income Tax. However, if an OCW or OFW has income earnings from business activities or properties within the Philippines, such income earnings are subject to Philippine Income Tax as follows: a. For Regular Income [Section 24 (A)]: i. Tax Rate of 5 -32% of taxable income b. For Passive Income [Section 24(B)]: i. 20% Final Tax on Interest Income from any currency bank deposit and yield or any monetary benefit from deposit substitutes and from trust funds and similar arrangements; ii. 20% Final Tax on any royalties; iii. 10% Final Tax on any royalty related on books, as well as literary works and musical compositions; iv. 20% Final Tax on prizes (except prizes amounting to P 10,000 or less which shall be subject to regular Income Tax rate of 5 -32%) and other winnings (except Philippine Charity Sweepstakes and Lotto Winnings); v. Exemption from 7.5% Final Tax on interest income from a depository bank under the expanded foreign currency deposit system upon presentation of proof of non-residency such as Overseas Employment Certificate (OEC) or Seaman’s Book. However, if the account is jointly in the name of the overseas contract worker or a Filipino seaman, and an individual (spouse or dependent) who is living in the Philippines, 50% of the interest income from such bank deposit will be treated as exempt while the other 50% shall be subject to a Final Withholding Tax of 7.5%; vi. 10% Final Tax on cash or property dividends vii. 5%/10% Final Tax on net capital gains realized on sale, barter, exchange or other disposition of shares of stock in a domestic corporation (except shares sold or disposed of through the stock exchange); viii. 6% Final Tax on capital gains from the sale, exchange or other disposition of real property located in the Philippines classified as capital assets based on gross selling price or current fair market value, whichever is higher; and ix. 5%/12%/20% Final Tax on interest income from long-term deposits or investment in the form of savings, common or individual trust funds, deposit substitutes, investment management accounts and other investments evidenced by certificates in such form prescribed by the Bangko Sentral ng Pilipinas, which was pre-terminated by the holder before the 5th year. An OCW or OFW may be subjected to 12% Value-Added Tax (VAT) if in the course of his trade or business, he sells, barters exchanges, leases goods or properties, renders services in the Philippines or imports goods into the Philippines pursuant to Sections 106 to 108 of the National Internal Revenue Code of 1997, as amended. However, if his gross annual sales and/or receipts do not exceed the amount of P 1,500,000 and he opted not to register as a VAT taxpayer, he shall be liable to pay instead 3% Percentage Tax of his gross quarterly sales or receipts. All migrant workers shall be exempt from the payment of travel tax and airport-fee upon proper showing of valid proof entitlement (i.e. OEC) issued by the POEA. The remittances of all OCWs or OFWs, upon showing of the OEC or valid Overseas Workers Welfare Administration (OWWA) Membership Certificate by the OCW or OFW beneficiary or recipient, shall be exempt from the payment of Documentary Stamp Tax (DST). In case of OCWs or OFWs whose remittances are sent through the banking system, credited to beneficiaries or recipient’s account in the Philippines and withdrawn through an automatic teller machine (ATM), it shall be the responsibility of the OCW or OFW to show the valid proof of entitlement when making arrangement for his/her remittance transfers. A proof of entitlement that is no longer valid shall not entitle an OCW or OFW to any DST exemption.