Americans in the Philippines

U.S. taxes for Americans in the Philippines: what to file, and how to catch up.

Retirees, veterans, remote workers and Filipino-American families make up one of the largest groups of Americans abroad, and all of them still file a U.S. return every year once their income is over the filing threshold. Catching up is usually simple. The details to get right are local insurance and investment products, and how your pensions are taxed. Most people who fell behind can catch up under the Streamlined procedures, with no penalty if they qualify.

Reviewed by Lewis Grunfeld, CPA

Get help from the Philippines

Philippine tax yearJanuary – December

Philippine return dueApril 15, if required

Usual U.S. toolExclusion or tax credit

FATCA dataAgreement signed, not in force

Tax treatyYes

Sound familiar?

You retired to the Philippines on U.S. Social Security or a pension.
You married a Filipino and settled near family.
You bought a VUL insurance plan that was sold as an investment.
You work remotely for a U.S. company from the Philippines.

How does the IRS treat Philippine pensions, savings and insurance?

Accounts go on your FBAR once they add up to more than $10,000. What differs is how the IRS taxes them.

Item	U.S. treatment
SSS and GSIS pensions	Under the treaty, only the Philippines can tax them, even for U.S. citizens.	Usually fine
Pag-IBIG and MP2 savings	Dividends are taxable for the U.S., even though they’re tax-free in the Philippines.	Taxable
VUL insurance	Insurance with funds inside. The funds can be PFICs, and growth may be taxable for the U.S.	Watch out
UITFs and mutual funds	Usually PFICs (Form 8621), with complex reporting and tax rules.	Watch out
Property through a corporation	Foreigners can’t own land directly. If you hold property through a Philippine corporation, you may need Form 5471.	Plan ahead
U.S. Social Security	Under the treaty, only the U.S. can tax it, not the Philippines.	Usually fine

Which Philippine investments are PFICs?

Unit investment trust funds (UITFs), mutual funds, and the funds inside VUL policies, which banks and insurers often sell as savings plans. For U.S. tax they’re passive foreign investment companies, or PFICs.

Each fund needs its own Form 8621 in most years, and gains can be taxed at the top U.S. rate plus an interest charge, unless an election was made in time.
VULs are where most Americans meet this, often without realizing the policy is mostly an investment fund.
Not PFICs: time deposits, Philippine government bonds, and bank accounts.

What does the U.S.–Philippines tax treaty actually say?

The treaty was signed in 1976 and took effect in 1983. For Americans living in the Philippines, these parts matter most:

The saving clause. The U.S. can tax its citizens as if the treaty didn’t exist, except for the provisions the treaty lists.
Social security. SSS and GSIS pensions are taxed only by the Philippines, even for U.S. citizens, and U.S. Social Security only by the U.S.
Relief from double tax. The U.S. gives a credit for Philippine income tax on the same income.

There’s no U.S.–Philippines social security agreement, so a self-employed American generally owes U.S. self-employment tax. Read the U.S.–Philippines tax treaty on IRS.gov.

When are Philippine and U.S. taxes due?

Both tax years run January to December, so each Philippine year lines up with one U.S. return.

	Philippines	United States
Tax year	January to December	January to December
Annual return	April 15, if you have income beyond a single local salary	April 15, moved to June 15 automatically when you live abroad, or October 15 with an extension
Paying the tax	Withheld on salaries, or quarterly for business income	April 15, even if you file later
Foreign accounts	No separate report	The FBAR, due October 15, filed online

Foreign tax credit or exclusion: which wins in the Philippines?

Retirees and veterans on U.S. Social Security, pensions and military retired pay use neither much: that’s U.S. income, outside the exclusion. VA disability benefits aren’t taxable at all.
Remote workers usually use the foreign earned income exclusion, up to $130,000 for 2025.
Employees of Philippine companies pay rates up to 35%, and either the exclusion or the foreign tax credit can work; we compare both.
Freelancers still owe U.S. self-employment tax, even when the exclusion covers the income tax.

How we compare the exclusion and the credit.

A worked example: a retired veteran in Cebu

Ron retired from the Navy and settled in Cebu with his Filipina wife in 2015. He receives military retired pay, VA disability and Social Security, saves in Pag-IBIG MP2, and was sold a VUL policy by a family friend. He stopped filing a few years ago.

Item	How it’s handled
Military retired pay	Taxable on his U.S. return, and enough on its own to require filing.
VA disability	Not taxable, and doesn’t go on the return as income.
Social Security	Taxed only by the U.S., under the treaty.
MP2 and VUL	MP2 dividends are taxable; the VUL’s funds are PFICs, with a Form 8621 each.
Catching up	Three years of returns and six FBARs under the Streamlined procedures, with no penalty if he qualifies.

Catching up from the Philippines

Most Americans in the Philippines who fell behind without meaning to can catch up under the Streamlined Foreign Offshore Procedures: three years of returns, six years of FBARs and, if you qualify, no penalties. If only FBARs are missing, or you’ve moved back to the U.S., another route may fit better. See every IRS catch-up option for expats, compared.

Common questions

I only get U.S. Social Security. Do I need to file?

Possibly not, if Social Security is your only income. Add a pension, interest or rent and you often do. Our filing checker gives a quick answer. Under the treaty, only the U.S. can tax your Social Security, not the Philippines.

I’m a veteran. Is my VA pension taxable?

VA disability benefits aren’t taxable. Military retired pay is taxable for the U.S. We’ll sort out which is which.

Do I pay U.S. Social Security tax in the Philippines?

Usually not if you work for a local employer. There’s no U.S.-Philippines social security agreement, though, so self-employment tax can still apply if you work for yourself, and FICA if you work for a U.S. company.

Is my VUL a problem for the U.S.?

It can be. Most VULs are mainly investment funds, which are usually PFICs, and growth may be taxable for the U.S. We look at your policy before reporting it.

Are Pag-IBIG MP2 dividends taxable?

Yes, for the U.S. They’re tax-free in the Philippines, but they go on your U.S. return, and the account counts toward your FBAR total.

My spouse is Filipino. How do we file?

Usually as married filing separately, so your spouse’s income stays off the U.S. return. Filing jointly is possible, and sometimes helps when one spouse has little income. Married to a non-American.