Move to the Philippines and Profit There

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Moving to The Philippines from the USA

(Updated 25 April 2019)

Why would anyone ever search Google for the phrase”Moving to The Philippines from the USA “?

Well, there’s a lot of possible reasons, but one that comes to mind right away is geographic arbitrage.

Geographic Arbitrage

Geographic Arbitrage (which I’ll call Geotrage from now on in the article)  is a rather complicated term for a simple life tactic … earn high and spend low.

“Easier said than done, Dave, ” I hear you saying.  “I can only earn so much (and don’t forget to whine “I’m on a fixed income” *sigh*.

“And it just costs so much to live … just the basic necessities.”

If You Just Can’t Make Ends Meet, Perhaps Geotrage is for you”

Arbitrage most simply defined; … is the practice of taking advantage of a price difference … “.  Now often when you hear someone rattling on about “arbitrage” they go off onto complex deals involving foreign exchange, buy or selling stocks and all sorts of complex monetary deals that give many of us a headache.

And which can be disastrously costly if you make a big mistake.

For our purposes here, we are going to define our coined word … Geotrage” as “earning a high cost of living income” (HCOL) while living in a low cost of living country. (LCOL).

Here’s an Example That Worked For Me

I’m a US-born man now in my 73rd year.  13 years ago, when I retired from my US government job, at age 60, I was about $40,000 USD in debt, had already sold my US home at a very low price to pay off even more debt, and I was living in a decrepit double-wide trailer with holes in the walls.

I receive a very nice pension from my former job … spent 38 years of my life all over the world earning it, but my income could hot really have been any more “fixed”.

Actually, I wish my income had been even more “fixed” because after 13 years of the “tender mercies” of three US presidents (cutting Civil Service entitlements is “good politics for either Red or Blue politicians) I make even less than I did in 2003 when I retired.

To Put It Mildly, I Had Month Left Over At The End Of My Money.

However, was I going to get a decent roof over my head and pay off that whopping pile of debt without going to Wal*Mart and getting a job as a door greeter … or flipping burgers at McDonald’s on the night shift?

I don’t even have a college degree, and even if I did, have you ever seen anything more pitiful than a60yo man sitting in the line of bright, young 20 yo’s at the employment office …waiting to be interviewed by a 30 yo who thinks that age 40 is “old”?

Don’t Call Us, We’ll Call You Takes On New Meaning After Age 50

What could I do?  What would YOU do in my shoes?

Fortunately, I had an “ace in the hole”.  I was married to a lovely lady from the Philippines who was with me there in the USA, working hard and earning everything she could to help pay thongs off.

Since my wife was already a US citizen, we were pretty much free to go and please as we wished, and when I had visited her family in the Philippines I noticed that life seemed a lot more laid back and easy there … and A HECK OF A LOT CHEAPER!

Remember the Geotrage definition a few paragraphs back?  Earn in HCOL money (US dollars) and spend in LCOL money .. like Philippine Pesos?

My wife and I sold off the two cars we didn’t need, garage-saled everything else in our house and bought one-way tickets to Manila, Republic of the Philippines.

Did we survive?

You bet we did.  We didn’t just “survive”, we thrived.

All that credit card debt is now paid off.   We own a car, bought new and now free and clear and a two story 3 bed 3 bath home that’s now fully paid for.

All in slightly under 13 years.  And trust me, we didn’t live like millionaires but we lived quite decently and well.  Ate too much, had too much fun, traveled to other locations in Asia very cheaply and have generally enjoyed life to the hilt.

How Can You Save By Leaving The USA?

First and foremost, things in most Asian countries are cheaper.

On average at least 40% cheaper.  Here are two independent sites which document people’s spending all over the world and allow you to compare costs one country or city with another.:

Numbeo

Expatistan

Go ahead, take a look for yourself and see what your costs might be.  The savings can be significant indeed.

Secondly, You can save a LOT on Income Taxes.

If you are a US citizen, you must report and pay to the IRS Federal Income tax on all income … by law.

You can’t escape US federal income tax by moving outside the USA.

But there’s a huge legal potential for tax savings for all citizens who are outside the USA for 330 or more days per year.  It’s called the Foreign Earned Income Exclusion (or FEIE).  And it is not a trivial amount by any means.

In the tax year 2018 for example, the FEIE is $104,100 USD for all taxpayers outside the SA for more than 330 days.

This means that the first $104,100 you receive in earned income from your work while outside the USA is excluded, that is subtracted out of the total adjusted gross income that you owe taxes on.  This can easily mean a direct reduction of 20% or more in your total cost of living for that tax year.

It Ads Up Fast

Let’s see now, as much as 69% direct cost of living savings, plus as much as 20% savings in US income taxes?  We seem to be getting into some real savings here.

Also, don’t forget state taxes.   There is no requirement that any US citizen also be a citizen of any US state.  In fact, there are several hundred thousand US citizens in this world who have never even BEEN to the USA.

So if you’re currently a citizen of a US state that levies outrageous state taxes on you, just change your legal residence overseas and you pay no state taxes to anyone.

How much would that save you every year?

So FarWeAre Up To A Pretty Whopping Potential Savings, Aren’t We?

What should you do next?

First, research, explore and most of all, open your mind to the fact that living inside the USA, especially in a high cost, high tax state is NOT the only way a US citizen has to live.

Second, realize that Geotrage need not be a “forever” thing.  A lot of people I talk to have the idea of moving overseas when they retire kind of floating around in the back of their minds.  This may be the wrong way to look at things.

When you are 60 plus, with health issues, needing to use the services of Medicare (important to note that Medicare pays for nothing outside the USA), grandkids growing up and such, being back in the USA may be the best place for you.

Making a 10 or 15-year move overseas when your earning power is at its peak, when your kids are not sucking up $100k a year in college tuition, etc., may be best … it’s all up to each individual family.

But Don’t Close Your Mind To The Power Of Earning High and Spending Low

I kept my mind open and wow, did it improve my personal finances a LOT.

If you have questions or comments, or you are curious why I chose the Philippines, rather than Thailand, where 90% of the Geotrage folks seem to head, be sure to leave a comment .. and let me know what you want to learn more about.

Let me know what else I can tell you about:

Moving to The Philippines from the USA.

Philippine Senior Citizen Discount Card.

(Updated 23 April 2019)

Basic Question Often Asked is, Can A Foreigner Avail Of The Philippine Senior Discount Program?

Basic answer:  No.

OK, I’m sure many of you living here in the Philippines want to know more than just a simple “No”, so I’ll tell you a little of the “why” behind that answer.

I first published a similar article to this one on this back in 2010, at the time the Aquino administration took office.

Let me first say, that as a foreigner I fully understand that the Philippine is a sovereign nation and has every right to enact and enforce their own laws.  We foreigners have no choice, legally or morally but to follow to laws.

I have no issue with following the law at all

But Some Big Changes Were Made in 2010.

And the 2010 changes can result in some very serious penalties for anyone who breaks the current law … and not only foreigners may be at risk here.

Some Filipinos and former Filipinos routinely break the current law, probably because they are not aware of how the law has evolved.

The revised rules for use of the Senior Citizen Card were one of the earliest pieces of legislation enacted by President Aquino.

The abuse and misuse of the Senior Citizen program might (or might not) be an item of some interest in the current administration.  This article is just a word to the wise.  I am not an attorney and this is not legal advice, but personal opinion only.  This article will not be of interest to some of my younger readers. No problem, feel free to flit elsewhere, I bear no grudge.

But almost all of us are in one of two groups.

Those who have already reached the “golden years” (like me) or those who hope to live long enough to be included … so perhaps this is of more general interest than you first thought it was.

Many also reading may have Filipino relatives age 60 or older, and you may find that some of what I write about here is very directly applicable.

Please note I am trying to eliminate all personal opinion here and present just the facts.

None of this is “what I heard” or what “Joe down at the VFW told me”.

I have a reference for every fact.

If you disagree, fine, but please be sure to refer to the facts presented before you start spouting off about how you heard differently.  If I did make an error and you find it, I’d a appreciate an authoritative reference, but don’t take up a lot of time telling me what Tita Toni down at your local Senior Citizen office “told you”.

She is not the law of the land.

The law has changed, significantly, since the Senior Citizen Card and Discount Program was first enacted.

There have been at least three major revisions in the law so what you KNEW back in 2006 or 2007 (just as what I myself KNEW back in 2006 when I moved here), is mostly wrong in 2019.

Is There a Viable Senior Citizen Discount Program in the Philippines?

You bet there is.  Among other benefits it covers:

• Purchase of medicines, including influenza and pneumococcal vaccines and other essential medical supplies, accessories and equipment;
• Actual fare for land travel in public utility jeepneys, taxis, Asian utility vehicles and shuttle services.
• Free vaccination against influenza and pneumococcal disease for indigent senior citizens.
• Benefit assistance to the nearest kin of a deceased indigent senior citizen worth P2,000.
• Five percent (5%) discount on water and electric bills registered in the name of the senior citizen, provided that consumption is below 100 kilowatt-hours of electricity and 30 cubic meters of water a month;
• Additional government assistance, i.e., social pension/monthly stipend of P500, mandatory PhilHealth coverage, and social safety assistance (food, medicines and financial assistance).

What Philippine Law Covers These Senior Citizen Benefits?

RA (Republic Act) 9994, known as The Expanded Senior Citizens Act of 2010

(This is the current law and is well worth reading for those of you with questions. Don’t worry, it’s less than 4 full pages, you won’t have to spend the whole day reading it.  Read the complete law here)

Who is covered by this act?

Residents of the Philippines who are citizens of the Philippines who have attained the age of 60 years.

You can look up the exact legal language up for yourself.

I have seen literally hundreds of Balikbayan Filipinos over the years who have cards and routinely avail of the Senior Citizen card.

Note the language that specifies “residents” of the Philippines.

This does not appear to mean “former residents” who now reside in California and are here visiting.

I wrote the sentence above in a slightly different fashion that the original act to point out something important.

Only Philippine Citizens may legally use the discounts and other benefits covered by RA 9994.

I get questions more often than you might think regarding this question, and I see it discussed, sometimes Ad nauseam, in groups and forums of interest to foreigners living in the Philippines.

(Oh, and by the way, if you are a former Filipino (as in living here under a 13(g) permanent visa, you are not a Filipino citizen for the purposes of this law, so the law does not cover you either.)

The language was written the way it is for a specific purpose … to distinctly define who is eligible … and there are a number of my foreigner friends, for example, who have long believed they were entitled to the senior discount privileges … and even some who already avail of them … but the new law is pretty specific.

Only Philippine Citizens are covered.

Now that I have made myself undyingly (un)popular with the foreigner community, let me mention a little about how some of the confusion regarding this law, and its predecessors have come to pass:

How It Used To Be:

The First Senior Citizen Law:

In the early 90’s, the first law on senior citizens, RA 7432, was enacted to maximize the contribution of senior citizens to nation-building and to grant them benefits and special privileges.

Among others, this law granted the senior citizens a 20% discount on purchases of essential goods and services.

Many of the official/semi-official writings I have seen on this law seem to be confusing about its applicability to permanent residents, as well as Philippine citizens … but the law itself says, specifically, that the Senior Citizen discount privileges and accompanying identification documentation is for Filipino Citizens only.

I don’t know how many of my readers might have been around the Philippines when the original law, RA 7432 was passed, but legally there was no confusion regarding citizenship. The Act clearly made the program available ONLY to Philippine citizens, so no real case for confusion.

Enter RA 9527 (and so begins the confusion)

In 2003, RA 7432 was amended by RA 9257, otherwise known as the “Expanded Senior Citizens Act of 2003,” which granted additional benefits and privileges to senior citizens.

There are also specific procedures in RA 9257 that allow government officials, such as barangay captains, to grant the issuance of the Senior Citizen ID to others, including foreigners if they make specific and documented contributions to their local community.

There Was a Legal “Window of Opportunity” from 2003 to 2010 for Foreigner Senior Citizen Cards.

Thus from 2003 until 2010, there WERE legal provisions for LGU (Local Government Officials) to issue Senior Citizen Discount Cards to foreigners who, in the LGU official’s opinion, basically, deserved them.

So there are a non-trivial number of non-Filipinos around today who have senior citizen cards which probably were issued legally at the time.

Every time this discussion comes up, I get many foreigners telling me, “You’re crazy, I have a legally issued Senior Citizen card.  You don’t know what you’re talking about!”

And, indeed, if those foreigners (or non-resident Filipinos) got their cards legally under RA 9257, they certainly were valid … at least at the time they were issued.

But Are They Legal Today?

This has lead to a LOT of confusion because if you have such a card and some upstart, non-lawyer like me comes along an tells you not only shouldn’t possess that card but that you might face jail or deportation for using it, I can well understand why thoughts of WTF come to mind.

But Beware! The New Law (Now In Effect)  is DIFFERENT!

In 2010 RA 9994 was signed into law.

However, if you bother to read it, you’ll note that there is no such provision for barangay captains, senior citizen coordinators and other local officials to issue Senior Citizen ID cards to foreigners or non-resident Filipinos.

Under the most current law, RA 9994 … so no citizenship, no ID … seems to be the clear intent.

With every Philippine law comes what some would consider the “fine print”.

The IRR (Implementing Rules and Regulations). I believe there may yet be changes in the IRR for RA 9994, but here is a link to them as they are currently published.

If you don’t want to wade through the whole reference, you might at least want to read:

5.1 SENIOR CITIZEN OR ELDERLY – refers to any Filipino citizen who is a resident of the
The Philippines, and who is sixty (60) years old or above. It may apply to senior citizens with “dual
citizenship” status provided they prove their Filipino citizenship and have at least six (6) months
residency in the Philippines.

I don’t know about you, but to me this is pretty clear that no “non-Filipino” is covered by the law.

And This Law Has “Teeth”

You also might want to pay particular attention to Article 24, Sections 3 and Sections 4 of the referenced IRR.

… use of the Senior Citizen privilege by a person not entitled to use the privilege is punishable by a fine of not less than P50,000 and (If I were a lawyer, I would tell you why they chose the word ‘and” here and not the word “or” … but in layman’s terms, it likely means you are going to jail) a prison sentence of not less than six months. …

Now as you well know, I am not an attorney, but the words above seem pretty clear to me, even with no law degree or bar exam.

Anyone out there who cares to offer an alternative explanation? (again, I mean something factual, not yet another “but I heard”) statement?

However, as you’ve no doubt heard Ron Popeil (you don’t know Ron? Google is your friend) say, “But wait, there’s more!”

The jail time and fines are in Section 3. Section 4 is short and sweet, and applies to most of us reading this:

In Addition to Jail:

“If the offender is an alien or a foreigner, he/she shall be deported immediately after service of sentence without further deportation proceedings”

Ouch! I don’t think a 20% discount on anything is worth that, do you?

Some Backup Information:

After I started writing, I ran across an official letter sent by the director of a large organization (with many foreigner members) here in the Philippines, asking for official policy on their former practice of issuing discount cards to foreigner members.

Here’s an excerpt from a March 2011 letter from the Department of Social Welfare and Development, the government agency who actually “owns” the Senior Citizen Discount program, in response to a letter from an executive here in the Philippines explicitly asking for an opinion on foreigners and balikbayans using the program. I think it reads pretty clear.

(sorry the image of the original letter has disappeared)

The Department of Social Welfare and Development gave a clear answer in their signed response that no matter what had been done in the past, only resident (at least 6 months in the Philippines) Philippine citizens are authorized to be issued Senior Cir=tizen discount cards and to avail of the program.

Is That Understandable?

Any English professors in the audience may differ with me .,, but I find this pretty clear.

Can you interpret that in any way to indicate there is a legal way for foreigners, or even non-resident Filipinos to avail of these discounts? I can’t.

So, now you know.

As a foreigner or former Filipino, you can not avail of the Senior Citizen Discount Program in the Philippines.

You must be a Filipino and furthermore, you must be legally resident in the Philippines for 6 months to qualify for the card. Things change over the years, they may change again … but the law of the land today seems pretty clear.

But What If I Already Have a Card?

If I had a card, as a foreigner, I’d burn it … I can’t see how the promise of an occasional discount can be worth the very real risk of a substantial fine, a mandatory jail sentence and then mandatory deportation.

However, this is the Internet, so YMMV … but you can’t say Dave didn’t warn you.

Reader Thoughts on Retiring in the Philippines.

(Updated January 11, 2019)

Here’s a great comment I received from a reader.  I wanted to make some additional comments and a couple of slight corrections, so I did, marked in blue.

Food is exempt of the 12% sales tax and many stores in the provinces don’t apply it to their sales or services at all. but at the big malls, it is applied, most surely.

Partially correct, but the way you have stated it could be a little misleading.

Food, in the raw, in its natural state is not taxed.  Example, if you buy a kilo of rice, even though it may be milled and polished and cleaned, it is not taxed.

A head of cauliflower, as it comes from the field is not subject to taxation.

But something so simple as a basic can of beans is subject to the 12% VAT.  When you go to the supermarket as I do at least once a week, you’ll soon see that the taxed items far exceed the tax-free items.

 

[Read more…] about Reader Thoughts on Retiring in the Philippines, Jan 2019

Are you thinking of Moving to the Philippines to Retire?

(Updated 8 January 2019)

Are you one of those folks who is thinking about moving to the Philippines to retire?

Perhaps to stretch that ever-shrinking fixed retirement income.

Perhaps to get away from ice and snow and cold forever.

Perhaps just for a change of pace, escaping the treadmill and rat race of the USA to relax in your golden years.

There are many other potential reasons.  But the big question in many people’s mind is,

Does Retiring in the Philippine Even Make Sense?

Well, the answer to that question is going to be different for almost everyone who asks it.

First of all, it is important to remember that there s almost never a definite, for sure and positive yes or no answer.

There are only pluses and minuses which will be different for almost everyone.

All an individual can do is to decide if the pluses or the minuses add up in favor of making the move or not … and specifically for that individual only.

[Read more…] about Moving to the Philippines to Retire