Based on what we have seen in the summaries of the articles referenced above, the independent contractor agreement between a US company and a Filipino contractor should probably include the following:

• The contractor agrees to submit the following required documents to the company:
  • The contractor agrees to accurately complete and submit IRS form W8-BEN prior to completing any work or getting paid any amount.
  • The contractor agrees to accurately complete and submit IRS Form W-9 (using their US TIN) if the contractor will earn $600 or more during a calendar year and worked for the company for at least 90 days while residing in the United States.
• The contractor attests that she/he is an independent contractor and not an employee, as evidenced by:
  • I have made a substantial investment in tools, equipment, and/or my work premises to complete the work that is required, AND/OR,
  • I exercise control over my work schedule and performance.
• The contractor agrees to fulfill all obligations in the Philippines required of independent contractors, including but not limited to:
  • Completing and submitting BIR Form 1905 to update my Tax Identification Number (TIN)
  • Completing and submitting BIR Form 1901 for Self-Employed and Mixed Income Individuals Registration
  • Obtaining any local government approval, including Barangay Clearance and Mayor’s Permit
  • Registering with the Department of Trade and Industry (DTI) or Securities and Exchange Commission (SEC) if I am operating as a sole proprietorship or partnership
  • Registering with the Social Security System (SSS) by completing and submitting Personal Record Form (SS For E-2)
  • Registering for PhilHealth by completing and submitting the PhilHealth Member Registration Form
  • Registering with the Pag-IBIG Fund by completing and submitting the Member’s Data Form (MDF)
  • Paying my annual registration fee, certification fee, and documentary stamp tax
  • Issuing official receipts or invoices using BIR Form 1906
  • Filing my Annual Income Tax Return (BIR Form 1701) and BIR Form 0605 in a timely manner

If an agreement only requires the Filipino contractor to do work without requiring the contractor to already have tools and equipment (i.e. they must use their own computer, Internet connection, phone, software etc.), then the Filipino may be an employee instead of a contractor per the Department of Labor and Employment (DOLE) Department Order No. 174, series of 2017 (DO 174). If the US company requires the Filipino contractor to work specific hours and/or closely monitors the status and quality of the Filipino’s work product AND provides the Filipino with the equipment and software to complete the assigned work, then that Filipino is definitely an employee and not a contractor!

Thus, the CYA agreement must also state:

• The contractor must set their own work hours as required to complete all tasks (with the only exception being days and times for one-on-one meetings that are negotiated between the contractor and the employer)
• The contractor must use their own computer, phone, Internet connection, and software to complete assigned tasks (with the only exception being access to shared systems used by the company such as email, an ‘office suite’, online storage, etc.)

The US company may want the contractor to provide a list of the tools, materials, and workspace investments that they made so that they can complete the assigned tasks. This can be used as evidence to avoid the Filipino contractor from claiming that they have been misclassified (i.e. claiming that they are an employee, not a contractor). Remember: DO 174 prohibits labor-only contracting, which is defined as an arrangement where the contractor or subcontractor does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, or does not exercise control over the performance of the work of the contractual employees. If the US company purchases a computer or phone for the contractor, and/or pays for Internet access, and/or purchases a desk or chair, and/or leases office space, and/or pays for software that is not the company’s typical email, office, or file storage services (because the contractor needs the software to do the job), then the Filipino is an employee, not a contractor!

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