One of the most important first tasks on moving to a new country as an expat is making sure your finances are in order. Money ranks high with finding somewhere decent to live, sorting out healthcare and if you have children, searching for a good school. Becoming an Expat living in the Philippines is no different and careful financial planning is needed.
Ask other expats about this – a high street bank survey did and found one in four expats had trouble organising their finances as a newcomer to the country where they lived. Juggling money between your former home and where you now live is a tough task. The rules governing how banks and financial firms work vary between countries, which can be confusing unless you know exactly who you are dealing with.
Then there’s managing money in different currencies, making sure you pay the right taxes on time and moving money between countries in different time zones. Making sense of your finances as an expat in the Philippines can be more than a little daunting, but this guide should help make things easier and a little less fraught.
Philippines Expat Financial Advice
No matter what you do for a living or if you are retired, as an expat you will need tailored financial advice for different scenarios as your life unfolds before you and unexpected events arise.
To make the best of your money, you need to know about short and long-term savings, which could cover a rainy day fund for coping with unforeseen bills and a pension for when you retire.
Other events are bound to arise – marriage, children, buying a home or even a buy to let property back in the UK should you think about returning.
An independent financial advisor can point out your financial options along the way while looking out for tax or investment traps along the way.
This guide will cover what you need to know about expat finance in The Philippines.
Financial advice is not only about paying less tax, expats need to know how to make the most of their money.
Tax is important, but only one brick in the financial wall.
Why go to The Philippines?
The government is working hard to make The Philippines attractive to wealthy foreigners with money to invest in the economy.
Retired expats are welcome under the Special Resident Retiree’s Visa (SRRV) – see more below – and the cost of living is low, making a finite income stretch much farther.
The country is warm and welcoming. With a population of more than 100 million stretching over nearly 7,500 tropical islands offering major cities, like the capital Manila, to sleepy backwaters with glorious sun-kissed, palm tree lined beaches.
The thriving big cities follow the American pattern of shopping malls, skyscrapers and busy living, but the older more relaxed Philippines still exists not far from the suburbs.
For older expats, the Philippines Retirement Agency helps with handling officialdom, providing visas and offering job opportunities and other benefits to encourage long stays.
Spending your money
Paying your bills or shopping in The Philippines is the same as most other places.
The shops take most international credit cards, but few, along with most banks and money exchange services will not change traveller’s cheques.
Most major currencies can be exchanged at airports, banks, hotels and a few larger stores.
On arrival, if you plan to take more than PHP50,000 into the country, you’ll need to obtain written authorisation from The Philippines Central Bank.
Current exchange rates put The Philippines peso at 51.4 to the US dollar and 65.2 to the British pound.
Trusting a financial adviser
As an expat, you are likely to need someone to guide you through the financial maze in The Philippines.
Your adviser should become like a close friend and confidante. They will have a privileged insight into your innermost financial secrets, and you need to respect that they will keep your sensitive information private and offer you best advice.
Getting on with each other is important, just like any other close relationship.
It’s OK to disagree from time to time, but if you have no trust, the relationship will fail and you will have to look for another adviser.
Why expats in The Philippines need a financial plan
Failing to budget and put a financial plan into place is a risky strategy because you are at the mercy of others.
Every expat has financial resources specific to them and their own ideas about spending and saving.
But a financial plan puts brakes and checks into place, like making sure you have life insurance, retirement saving is on track and that you have money left to pay the bills and have a little fun on the way.
A financial adviser is a travel guide for your financial journey.
Every so often, they should confirm you are on track and give a heads up about what lies ahead so you can take avoiding action.
As the client, it’s always your choice whether to follow their advice or to take a different route.
What is a financial plan?
Everyone likes to think they make their own decisions in life, but control over managing your money is often limited by external factors.
The money markets and interest rates can rise and fall, inflation will impact on savings, charges can eat into savings and investments, while governments often regard people prudent with their money as a cash cow there to milk of more tax.
A financial plan tries to consider how what might happen will play out by running software models to show how events beyond your control could affect your savings and investments.
The best financial plans include a budget, how to set aside money to cover a short-term emergency, like accident or illness that stops you working for a few weeks.
Then, they look at the medium to long term of three or more years into the future and consider how to invest to match your financial goals.
These could include school and university fees, buying a home, a pension or starting a business.
And don’t believe financial planning is only for the rich.
Your financial status as an expat doesn’t matter, professional advice can make all the difference to your income, whatever you have in the bank.
Your savings and investments influence much of your life, such as the type of home you have, your car and what you can spend on holidays and other pursuits.
Financial advice priced at more than you save as a result is not cost-effective.
Questions to ask your financial advisor
Making the right financial choices is never easy – most people have a nagging doubt that they could have done better.
You can help put your mind at ease by asking your financial adviser some key questions:
Is this decision right for me?
Your financial adviser should recommend insurance or investments that tie in with your financial plan. That means taking account of your current spending and lifestyle as a benchmark as well as discussing your financial goals.
You should be confident that your adviser has considered all this before drafting a short list of products or services for you and should be able to explain the thinking behind the advice.
What financial products do I need?
This is one of those ‘everyone is different’ answers that depends on your personal financial circumstances, if you are married with a family and how old you are.
The question is precisely why a good financial adviser will benchmark your financial status before putting forward any recommendations.
Your adviser should have the qualifications and experience to offer everything you need to know about managing your money, including:
- The best way to save
- Do you need to pay for private medical care in The Philippines?
- Can you buy a home without a Filipino partner or associate and how much will a property loan cost?
- What cross-border taxes might you pay on top of tax in The Philippines?
- Should you keep money offshore?
- How to pay to educate your children or grandchildren?
- Saving for a pension
- Making a will in The Philippines and in your home country and how they interact with each other
These are easy questions for your adviser, but more perplexing for you if you do not have a detailed knowledge of tax and finance in The Philippines.
A reputable adviser is not a n immigration lawyer or tax expert, but should have arrangements to call on other professionals if necessary.
A crucial question if you can afford not to take financial advice as an expat.
How much should financial products and advice cost?
Ask for a breakdown of costs together with features and benefits for each product or service recommended.
The cheapest or most expensive are not always the best – you want to pay for the features and benefits that are important to you and compromise in other areas. Your adviser will charge depending on their status (see the section titled How much does financial advice cost? below)
How much should I save or invest?
This is part of your financial plan and varies between expats.
For instance, a married expat with children will have a different financial outlook than a young single expat. Many advisers have a rule of thumb to work out how much you should save:
- Pay more for what you need rather than an unrealistic notion of what you want
- Around half your income should cover your needs
- Around a third should go towards savings and insurance
- The rest should go on what you want
Save little and often
Don’t make grand gestures you can’t afford, instead every little helps over the long term. This means drip-feeding savings over the long term rather than larger amounts in fits and starts.
This allows compound interest work some magic to grow your money.
What does a financial adviser do?
A financial adviser is a professional with the skills and qualifications to help you arrange your savings, insurances and investments to your best advantage.
Besides finding the right financial products for you, the adviser should first benchmark what you have, then discuss your attitude to risk. This helps choose what sort of investments you are willing to make by balancing the risk of losing money against what you hope to gain.
Another key role is projecting forecasts of how much your savings and investments will be worth for your retirement and milestones in between now and then.
Financial advice is not a one-off. Your adviser should program regular check-ups and reviews to confirm your plans are on track, and if not, any options you may have to make them do better.
Philippines financial advice qualifications
Financial advisers in The Philippines are often well-meaning and experienced individuals who do not have formal qualifications and ongoing career development supervised by a professional body.
A financial adviser should at least qualify as a Registered Financial Planner (RFP) of the trade body RFP Philippines, which offers a certification program and a professional code of ethics that members should follow.
Most expat advice firms operating in The Philippines are regulated in the UK with advisers holding certifications from the Chartered Institute for Securities & Investment (CISI).
The main financial certification bodies recognised in The Philippines besides the RFP and CISI are:
- Chartered Insurance Institute
- Personal Finance Society
- London Institute of Banking and Finance
- Chartered Institute of Bankers in Scotland
- CFA Society of the UK
- Institute of Financial Planning
- Pensions Management Institute
- Scottish Qualification Authority
For wills, trusts and inheritance advice, try someone belonging to STEP (Society of Trust and Estate Practitioners) or SOLLA (Society of Later Life Advisers).
QROPS advice for The Philippines
The Philippines is not a recognised jurisdiction for QROPS (Qualifying Recognised Overseas Pension Schemes) and the overseas transfer charge will apply to expats resident in the country.
The transfer charge is a 25% tax on the value of a pension fund switched to a QROPS.
Expats looking to move their UK pensions offshore without the overseas transfer charge can consider a self-invested pension plan (SIPP).
Why you should deal with a professional adviser
Although many financial advice qualifications are similar between countries, government regulation is not.
The UK has arguable the most rigorous financial watchdogs and a compensation scheme if things go wrong, but many other countries do not.
The best you can do is only consult an adviser belonging to a professional body.
Advisers belonging to a certifying body are likely to have business insurance and work to a code of ethics.
Most professional bodies have an independent adjudicator handling complaints who can award compensation.
To find out if your adviser is part of a professional body, ask for their qualification and membership number. You can confirm this by calling the body or by searching their web site. This information is on a business card or letterhead.
Most big brands in the industry do not employ with uncertified advisers, so sometimes it pays to stay away from sole traders or small firms.
Verifying your financial adviser
Besides checking an adviser’s qualifications with their professional body, there are some other checks you run.
You may know someone who has does business with them and can offer a reference. Testimonials offered by the adviser are not that helpful as they are unlikely to put up a customer who doesn’t have something good to say.
Search for independent online reviews out of control of the adviser or the firm they work for. These can give a flavour of what the adviser is like, but most of us post comments for bad work, rather than anything good.
Your background checks should include:
- Confirming qualifications and experience working with expats in The Philippines
- Confirming their independent or tied advice status
- Asking about fee and commission structures
- Considering how you would take advice if you or the adviser should or leave The Philippines
- Look at how the adviser deals with tax and estate planning between the UK and The Philippines
- Monitoring the response to phone, email or text messages. An advisor who can’t reply within a reasonable time to a new client is unlikely to offer current clients good customer service
Finding a financial adviser
There are several places to look, but a good word from a friend or colleague is always useful – providing you carry out your own due diligence as well.
The Philippines has loads of online directories and financial advisers regularly write in newspapers and magazines, although most are tied.
Many international expat financial advice firms regulated in the UK have offices in The Philippines and offer financial solutions wherever you are in the world.
The Registered Financial Planner (RFB) web site can pair you up with some suitable candidates.
Picking the right adviser is like recruiting staff at work. They not only need to have the qualifications and experience to do the job, but you hope they also fit in socially as well.
Try at least two or three before you make a final decision and remember whoever you choose could stay in your life for a long time.
What sort of advice are you getting?
You need to know the professional status of your financial adviser from the start as it impacts the quality of advice they give.
Financial consultants are independent, multi-tied or tied.
Independent financial advisers
These arecommonly called IFAs or international IFAs – should give unrestricted, whole-of-the-market advice. IFAs can pick products and services from any provider that suit your needs. Overseas IFAs can be paid commission, charge a fee or make their money from a mixture of both.
Multi-tied financial advisers
Multi-tied advisers can source products and services from a limited list of providers. They generally work for a network or a bank and charge no fees but earn commission on the insurance or savings plans that they sell.
Tied financial advisers
A tied adviser has the most limited choice of financial products and services, usually restricted to those offered by their employer. A tied adviser typically works for a bank or insurance company. They earn commission on sales.
Independent v tied financial advice
If you take recommendations from a multi-tied or tied adviser, they have no obligation to tell you about better or cheaper rival products, so you could pay more and overlook a better deal.
Just remember if an adviser in The Philippines offers you something for free, you will pay somewhere along the line.
How much does financial advice cost?
Good financial advice comes at a price.
In The Philippines, advisers earn commission and sometimes it’s hard to work out the cost added to take account of their sale.
Commission can be good for expats. You undoubtedly would not offer free labour and you should expect financial advice to come at a reasonable cost.
You can cut costs by negotiating a fixed fee for specific advice or a discount if you want a portfolio of work, like a mortgage, savings plan and a pension. Street away from a fee based on time as this can be manipulated.
Added extras that bring benefits
Large expat financial providers have such big client lists and sign up so many customers for insurance, savings and pensions that banks and investment houses offer them sweeteners to refer more customers.
These include discounts and savings for customers.
Some of these firms are one-stop expat finance shops with experts who can give guidance on banking, mortgages, savings, investments and pensions under a single roof.
Putting your finances with a regulated firm can make sense for busy expats.
Don’t forget to settle your expat tax
Sorting out your tax residence as soon as you can is a big cog in the expat finance wheel.
Tax residence is typically the place you call home and where your life is based. Most countries have a checklist of indicators that point to where you pay your taxes.
Expats cannot determine this for themselves, it’s a matter of fact based on the checklist.
If the tax man at either end of your journey decides you come under their jurisdiction, you must pay tax as they demand and follow their filing rules.
For British expats, that’s HM Revenue & Customs – but countries, like the USA and South Africa from 2020, expect expats to pay tax on their worldwide income regardless of where they live.
The Philippines Bureau of Inland Revenue demands income tax on resident aliens – expats based in the country – who stay for more than 180 days.
Rates of tax depend on the source of income, but expect to pay 20% – 25%.
Don’t forget to finalise your tax affairs in the country you are leaving as well as your new home.
HMRC expects departing British residents to file an exit form P85 plus a self-assessment tax return to bring their UK taxes up to date.
Tax Advice for Expats in Philippines
Best tax advice for expats is find a professional in your home country and where you live to make sure you don’t pay more than you should.
Like financial advisers, most tax consultants are qualified and regulated to give advice in the country where they live and work and not overseas.
For expats who want to stay above the law:
- Start your tax plans at home and in The Philippines months before you leave for your new home
- Tax follows residence, so find out where that is as soon as you can
- Don’t try to sort out your own tax, it’s a minefield – get professional help
- Expats want free access to their money wherever they are, but The Philippines has rules about moving the local currency in and out of the country
- Healthcare is free for most people in The Philippines, but some expats might slip through the rules and need a private policy or a top-up if an employer is offering cover
- The Philippines has a double taxation agreement with the UK, so the tax you pay in one country is generally credited against the tax due in the other
FATCA and CRS
FATCA- the US Foreign Account Tax Compliance Act – and CRS – the Common Reporting Standard – are aimed at making sure any tax resident of countries in the networks cannot keep money or other assets hidden offshore.
FATCA is a US program that includes banks and finance houses in The Philippines.
Any FATCA registered financial institution feeds data on accounts held by US nationals to the Internal Revenue Service (IRS), and in many cases, the IRS reciprocates with information about Philippine residents with accounts and investments in America.
CRS is a similar network to FATCA comprising of more than 100 countries, but The Philippines is not yet a member state and is not listed to join before 2021 at the earliest.
Plan for an early exit
Many expats go home sooner than expected due to family problems (54%), health issues (42%) or homesickness (28%), according to data from the Legatum Institute Foundation.
Leaving early can upset the best financial plans and end up a costly exercise, so don’t up sticks and go to The Philippines on a whim.
Visas for The Philippines
Anyone can enter The Philippines for 30 days without a visa or for 59 days with a tourist visa.
Stays can be extended at the Bureau of Immigration. Overstaying can be costly and lead to detention and deportation.
If you intend to live or work in The Philippines, you will need certified documents proving identity and residence stamped before you enter the country.
In the UK, they are certified by the Foreign & Commonwealth Office and The Philippines Embassy.
Passports should be valid for the duration of your stay in The Philippines.
Children under 15 years old travelling without a parent must have a valid waiver of Exclusion Ground to enter the country. This can be provided by any Philippines embassy or on arrival through the Bureau of Immigration.
If a child (under 15) is travelling to visit a parent in The Philippines, they should have a copy of their parent’s resident visa.
The Philippines offers a special retirement visa for expats who want to live or invest there.
The Special Resident Retiree’s Visa (SRRV) comes in several types offering different options based on age and wealth.
The visa covers two dependents, such as a spouse and children under 21 as well.
The basic visa conditions are:
- Indefinite stay allowed with multiple entry and exits
- Tax and customs exemptions
- Entitlement to free health care
The visas and their qualifying conditions are:
For healthy retirees depositing US$20,000 in any accredited bank
For healthy retires buying a home worth more than $50,000 for expats over 50 depositing $10,000 with pension income or $20,000 without a pension.
Pension income should be more than $1,000 a month for a couple and $800 for a single person.
Younger expats aged 35 to 49 years old also qualify with a $50,000 deposit.
SRRV Human Touch
For expats in ill-health aged over 35 years old who can deposit $10,000 in a bank; have private health cover and a monthly pension of $1,500.
For expats aged 50 or over who have retired from an international organisation recognised by The Philippines Department of Foreign Affairs who can deposit $1,500 in a bank.
SRRV Expanded Courtesy
For expats aged 50 years old or over who have retired as officers from foreign armed forces with military ties with The Philippines government. They should show they have a pension of $1,000 a month or more and deposit $1,500 with a bank.
Other Country Financial Advice Information
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