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The Philippines is one of the world鈥檚 top outsourcing and freelancing hubs. For startup founders in the US, UK, and Australia, tapping into this talent pool offers an unbeatable combination of skill, affordability, and communication ease. But with the Bureau of Internal Revenue (BIR) stepping up tax enforcement on freelancers, hiring independent Filipino contractors is no longer as straightforward or risk-free as it used to be.

This blog explores how the new tax regulations affect your offshore hiring strategy and why using an Employer of Record (EOR) might be your best move going forward

The New Philippine Tax Landscape for Freelancers

What Changed?

In 2023鈥�2024, the Philippine government intensified efforts to bring the booming freelance sector under stricter tax compliance. This includes:

• Mandatory registration with the BIR (Bureau of Internal Revenue) 
• Issuance of official receipts (ORs) for all freelance transactions 
• Monthly/quarterly VAT or percentage tax filings 
• Annual income tax return (ITR) submissions 
• Possible future inclusion in social security, health, and housing fund contributions (SSS, PhilHealth, Pag-IBIG) 

While the law isn鈥檛 new, enforcement has increased dramatically. Freelancers who ignore registration and tax requirements risk hefty fines and potential blacklisting by clients.

Why This Matters to Founders

If you鈥檙e a founder working with Filipino freelancers, here鈥檚 what you need to consider:

1. You May Be Implicated

If you鈥檙e directly paying a non-compliant freelancer, your company could be exposed to tax audits or be required to withhold taxes. This is particularly relevant for founders in Australia or the UK, where your domestic tax agency may scrutinize foreign contractor payments.

2. Worker Instability

Filipino freelancers who don鈥檛 regularize their tax status face the risk of having their earnings frozen or flagged. That instability can cause delays, turnover, or even legal disputes.

3. Compliance Costs Are Rising

Filipino freelancers now have to invest in accountants, regular filings, and administrative compliance. Some may increase their rates, while others may look for safer employment structures like those offered through EORs.

What Founders Are Asking

Q: Is it still legal to hire Filipino freelancers directly?
Yes,but with increasing risk. If the freelancer is compliant with local taxes and you’re not establishing a pattern of employer-like behavior, you may be fine. But that’s a big 鈥渋f鈥� in today鈥檚 environment.

Q: What happens if the freelancer isn鈥檛 paying taxes?
Technically, liability falls on the freelancer. However, BIR has the power to trace payments from foreign companies and investigate sources of income. This could pull your company into a complex legal situation especially if you鈥檙e paying several freelancers.

Q: Can I just shift to paying them through Upwork or other platforms?
That may reduce risk, but it comes at a cost. Fees can be high, and the platform still doesn鈥檛 absolve you of worker classification or tax scrutiny especially if the freelancer relies solely on your projects.

The EOR Advantage: Simple, Legal, Scalable

An Employer of Record (EOR) is a legal entity that hires employees on your behalf in the Philippines, handles all tax compliance, benefits, and labor law obligations, while you manage the worker鈥檚 day-to-day tasks.

Here鈥檚 how an EOR addresses the freelancer tax issue:

Ensures Tax Compliance

EORs take care of BIR registration, income tax withholding, and government contributions. Your worker is 100% compliant with Philippine law.

Mitigates Legal Risk

Because the EOR is the legal employer, your startup is shielded from labor disputes, audits, and classification issues.

Offers Employment Benefits

With EOR, your Filipino team gets access to benefits like health insurance, 13th-month pay, and leave entitlements making you a more attractive employer.

Scales with You

Whether you have 1 Filipino remote worker or 100, the EOR model grows with your business without the need to register a local entity.

Real-Life Scenario

Startup: HealthTech company in Sydney
Hiring: 5 Filipino UI/UX designers as freelancers
Problem: The BIR flagged two of the freelancers for unpaid taxes. The freelancers paused 聽 聽 work to resolve the issue, and the startup faced delays. Investors raised red flags about compliance.

Solution: The company transitioned the team to an EOR model. The designers were onboarded with proper contracts, payroll, and benefits. Productivity resumed, and the company now promotes its legal and stable employment structure when hiring offshore.

Comparison: Freelancer vs. EOR Hire in the Philippines

The Bigger Picture: Building Global Teams the Right Way

Startups love hiring freelancers for their flexibility, speed, and low cost, but as global labor laws evolve, so must your hiring model. What used to be a 鈥渜uick win鈥� can now be a long-term risk.

With an EOR, you gain:

• Peace of mind from full legal compliance 
• Stronger employee retention through benefits 
• A smoother experience for investors and clients 
• Better branding as a legitimate and ethical employer 

Key Takeaways for Founders

• The Philippine government is serious about taxing freelancers and enforcement is rising. 
• Founders working with non-compliant freelancers could face indirect exposure. 
• EORs offer a legal, simple, and growth-friendly alternative to direct freelance hires. 
• Moving from freelancers to EOR employees doesn鈥檛 mean losing flexibility, it means gaining security. 

Startups thrive on adaptability. The smartest founders are already adjusting to the new global hiring realities. As rules tighten, the best way forward isn鈥檛 to cut ties with offshore talent it鈥檚 to elevate them.

Using an EOR in the Philippines helps you stay competitive while staying compliant.

馃摡 Email eor@zeroten.work to learn more about how EOR can help you build a compliant global team.