Plan contractor hiring in the Philippines

A Philippines-resident contractor should be engaged as a registered self-employed business, with fees tied to defined services or milestones and documented by a BIR Invoice. The working arrangement should leave the contractor in charge of delivery methods, sequence, work location, productive resources, and ordinary business costs. The customer can specify outcomes, security rules, deadlines, and acceptance criteria without directing the daily means and methods. Before work starts, match the contract to the contractor's BIR registration and any DTI business name. Repeat the classification check whenever the customer adds fixed hours, continuous supervision, exclusivity, wage-like pay, or a practical power to dismiss the individual from ongoing work.

Sources: Supreme Court E-Library, Tiangco v. ABS-CBN Corporation, Bureau of Internal Revenue, Revenue Memorandum Circular No. 91-2024

If the line is crossed

If the working facts satisfy the four-fold test, the individual can be treated as an employee and can pursue the protections and remedies attached to that status. The result can replace project-fee analysis with wage, dismissal, and other employment questions for the period concerned. A no-presence offshore customer faces a separate SSS employer-nexus question. The SSS definition reaches a foreign person only when it carries on a trade, business, undertaking, or activity in the Philippines and uses a worker under its employment orders. Assign SSS registration or contribution duties to the customer only after those statutory nexus facts are established for the engagement.

Sources: Supreme Court E-Library, Concepcion v. Court of Appeals, Social Security System, Employer definition

Certificate of Registration (COR)

The BIR Certificate of Registration is the contractor's primary tax-registration record for onboarding. Request a current copy before the first invoice and match the registered name, TIN, address, taxpayer type, and registered tax obligations to the contract. The certificate helps determine whether the supplier presents as VAT-registered or non-VAT and whether the invoice uses the corresponding form and tax wording. It also separates the supplier's legal name from an optional DTI business name. The COR confirms registration status only; it cannot settle employee classification or prove that a particular cross-border service satisfies the VAT zero-rating conditions. Retain it with the contract, any DTI certificate, and the first accepted invoice.

Issued by: Bureau of Internal Revenue to the registered self-employed taxpayer

Timing: After BIR registration and before the buyer accepts the first service invoice

Sources: Bureau of Internal Revenue, NewBizReg, Bureau of Internal Revenue, Revenue Memorandum Circular No. 91-2024

A Philippine contractor issues a BIR-registered Invoice for the service, with VAT wording determined by the contractor's registration and the export-service facts. EOPT moved service sales to an accrual basis and made the Invoice the primary sales document. A VAT-registered contractor may use zero percent for qualifying services performed in the Philippines for a person engaged in business outside the Philippines when consideration is in acceptable foreign currency and is accounted for under BSP rules. Confirm the customer's offshore business status, service scope, and settlement records before accepting zero-rated wording. A non-VAT contractor issues a Non-VAT Invoice and cannot present the sale as a VAT zero-rated transaction.

Sources: Bureau of Internal Revenue, Revenue Regulations No. 3-2024, Republic Act No. 10963, section 108(B)(2), Republic Act No. 12066

What an invoice has to show

• Invoice as the primary document

  The document must operate as an Invoice for the service sale. Under the EOPT rules, an Official Receipt, payment acknowledgement, collection receipt, billing statement, or statement of account is supplementary when issued alone. Accept a legacy form only when it has been validly converted under BIR's transition rules, prominently carries Invoice wording, and contains the required invoice data. This check matters even after the customer has settled the amount because a settlement document records collection rather than the taxable sale. Return a supplementary-only document for correction and retain the compliant Invoice with the service acceptance and contract records.

  Sources: Bureau of Internal Revenue, Revenue Memorandum Circular No. 77-2024

• Registered seller identity and complete service-sale data

  The Invoice should show the contractor's registered name, TIN, business address, invoice number, issue date, the foreign customer's name and address, the nature of the service, and the amount due. Match the seller data to the BIR Certificate of Registration and any DTI business name, and match the service description to the contracted milestone or period. BIR's official zero-rated sample also shows the authorized invoice series or system details. A foreign customer without a Philippine TIN should never supply a fabricated number. Preserve the real offshore identity and address, because those customer facts also support the separate review of export-service VAT treatment.

  Sources: Bureau of Internal Revenue, Invoice sample formats, Bureau of Internal Revenue, Revenue Memorandum Circular No. 77-2024

• VAT status and zero-rated amount

  A VAT-registered contractor claiming export-service treatment should prominently state Zero-Rated Sale and show the total zero-rated sales amount. The file should also support that the work was a qualifying service performed in the Philippines for a person engaged in business outside the Philippines, with acceptable foreign-currency consideration accounted for under BSP rules. If any condition fails, obtain the correct VAT treatment before booking the invoice. A non-VAT contractor uses a Non-VAT Invoice and leaves VAT zero-rating language off the document. BIR states that a non-VAT seller issuing a VAT Invoice can become liable for VAT and an additional surcharge.

  Sources: Bureau of Internal Revenue, Revenue Memorandum Circular No. 77-2024, Bureau of Internal Revenue, Invoice sample formats, Republic Act No. 10963, section 108(B)(2)

The contractor should bill the agreed service, milestone, or period with a BIR Invoice, while the agreement sets acceptance and the due date. EOPT records service sales on an accrual and billing basis, so a long customer settlement term can leave the contractor reporting the sale before receiving the fee. State the billing trigger, review period, dispute procedure, invoice currency, due date, and consequence of late settlement in the contract. Keep delivery acceptance separate from tax-document validity. The invoice should still be issued for the completed or billed service even when the customer requests supplementary collection documentation later. For this service, use the agreed due date. If Philippine law governs and the contract fixes no due date, the customer generally enters delay after the contractor makes a judicial or extrajudicial demand, subject to the exceptions in Civil Code article 1169.

Sources: Bureau of Internal Revenue, Revenue Regulations No. 3-2024, Supreme Court E-Library, Civil Code of the Philippines

When invoices are settled

The agreed due date is the settlement window when Philippine law governs the service contract. Civil Code article 1159 gives contractual obligations the force of law, and article 1169 generally starts debtor delay after judicial or extrajudicial demand. The contract can make demand unnecessary by stating that delay begins automatically at the due date. Define a calendar date or a measurable number of days after a complete Invoice and accepted milestone, then specify who receives a dispute notice. When an unstipulated legal-interest rule applies to a monetary obligation after default, BSP Circular No. 799 sets six percent a year. That rate is a default consequence rather than a standard commercial term.

Sources: Supreme Court E-Library, Civil Code of the Philippines, Bangko Sentral ng Pilipinas, Circular No. 799

The currency on the invoice

The parties may state the service fee and Invoice in an agreed foreign currency, while the contractor converts the transaction into Philippine pesos for local tax reporting. BIR says foreign-currency transactions for VAT and other percentage taxes use the prevailing spot rate on the transaction date, with VAT based on the Invoice and percentage tax based on quarterly gross sales. The contract should identify the pricing currency, the amount that satisfies the obligation, and who bears conversion charges. If a VAT-registered contractor relies on section 108(B)(2) zero-rating, retain settlement records showing acceptable foreign currency and BSP-compliant accounting. Currency choice never cures a missing export-service condition.

Sources: Bureau of Internal Revenue, Revenue Memorandum Circular No. 5-2025, Republic Act No. 10963, section 108(B)(2)

Local currency rules

Ordinary foreign-exchange proceeds from the resident contractor's service income may be used freely under the BSP foreign-exchange manual. The resident may sell the proceeds for pesos, retain them, or deposit them in a foreign-currency account in the Philippines or abroad. This rule means the ordinary inbound service fee has no general BSP conversion or repatriation deadline. The buyer should still identify the contract, Invoice, payer, currency, and settled amount so the contractor can support tax reporting and, where applicable, VAT zero-rating. Regulated services, institutional verification, and transaction-specific reporting can add separate checks, so unusual facts should be reviewed before settlement rather than inferred from the general non-trade receipt rule.

Sources: Bangko Sentral ng Pilipinas, Manual of Regulations on Foreign Exchange Transactions

Treating registration papers as proof of contractor status

A BIR Certificate of Registration, a DTI business name, and a contractor agreement cannot decide worker status when the operating facts show employment. The Supreme Court's four-fold test examines selection and engagement, wage payment, dismissal power, and control over the means and methods, with control carrying the greatest weight. A buyer creates the mismatch by setting daily methods, fixed employee-like hours, constant supervision, exclusivity, or an ongoing dismissal power while relying on invoices as the answer. Review actual management practices at onboarding and after material role changes. Keep instructions focused on outcomes, security, deadlines, and acceptance, and leave genuine delivery decisions and business responsibility with the contractor.

Sources: Supreme Court E-Library, Tiangco v. ABS-CBN Corporation

Accepting a collection document without the Invoice

An Official Receipt, collection receipt, payment acknowledgement, billing statement, or statement of account issued alone is a supplementary document under the current BIR rules. The service sale requires an Invoice as its primary record. A buyer can miss the defect when the amount and supplier appear correct and settlement has already occurred. Check the document title, registered seller data, TIN, date, invoice number, service description, amount, and VAT status before acceptance. A legacy official-receipt form works only when converted under the transition rules, prominently made into an Invoice, and completed with the required fields. Ask for a corrected Invoice instead of filing the supplementary document as the sale record.

Sources: Bureau of Internal Revenue, Revenue Memorandum Circular No. 77-2024

Applying zero-rated VAT from the foreign address alone

A foreign customer address cannot by itself make the service VAT zero-rated. The contractor must be VAT-registered, the service must fit section 108(B)(2), the recipient must conduct business outside the Philippines, and consideration must be acceptable foreign currency accounted for under BSP rules. Confirm those facts before accepting Zero-Rated Sale wording and preserve the contract, customer business details, service description, Invoice, and settlement support. A contractor below the mandatory threshold who remains non-VAT issues a Non-VAT Invoice instead. BIR states that a non-VAT seller issuing a VAT Invoice can owe VAT without input credit and face an additional surcharge, so inaccurate tax wording creates a concrete supplier liability.

Sources: Republic Act No. 10963, section 108(B)(2), Bureau of Internal Revenue, Revenue Memorandum Circular No. 77-2024