US based small business consulting in the Philippines tax help

Question

I am a consultant working under my own S corporation based in the united states.

For my situation, I will be undertaking work in the Philippines to consult a client. This client who is based in the Philippines, rather than paying me my entire quoted rate wants to withhold some of the amount for taxes. However, it is my understanding that I should receive the entire quoted amount and then only deal with taxes on my end here in the USA.

Any suggestions on if this is "right" or how I should work with this situation? They are not employing me, but merely using my services as a US-based company traveling to the Philippines to help.

Answer 1

You should probably get a professional tax advice, as it is very specific to the Philipines tax laws and the US-Philippine tax treaty.

What I know, however, is that if it was the other way around - you paying a foreigner coming to the US to consult you - you would be withholding 30% of their pay for the IRS which they would be claiming for refund on their own later.

So if the US does it to others - I'm not surprised to hear that others do it to the US.

Get a professional advice on what and how you should be doing. In any case, foreign taxes paid can be used to offset your US taxes using form 1116 up to some extent.