Philippine Income Tax on VA Benefits and U.S. Military Retired Pay

Three provisions of the Philippine National Internal Revenue Code, as amended by Republic Act No. 8424, decide this, and none has been changed by the later tax reform acts (RA 10963 in 2017, RA 11534 in 2021, RA 12066 in 2024 or RA 12214 in 2025). VA benefits are excluded for everyone living in the Philippines. Section 32(B)(6)(d) excludes from gross income "payments of benefits due or to become due to any person residing in the Philippines under the laws of the United States administered by the United States Veterans Administration." It does not depend on citizenship, so it covers a U.S. veteran, a Filipino veteran of U.S. forces, a dual citizen and a survivor alike, and it covers compensation, pension, DIC and education payments. A non-citizen is taxed only on Philippine-source income. Section 23(D) says an alien individual, resident or not, is taxable only on income derived from sources within the Philippines. U.S. military retired pay is not Philippine-source: Article 4(5) of the U.S.-Philippines income tax convention treats government pensions described in Article 20 as income from the paying country only. A retiree who is not a Philippine citizen therefore owes no Philippine income tax on it. A dual citizen is taxed on worldwide income, and an exclusion covers the pension. A Filipino-American veteran who has reacquired Philippine citizenship and lives in the Philippines is a resident citizen, taxable on income from all sources under Section 23(A). Section 32(B)(6)(c) then excludes "social security benefits, retirement gratuities, pensions and other similar benefits received by resident or nonresident citizens of the Philippines or aliens who come to reside permanently in the Philippines from foreign government agencies," which reaches military retired pay and U.S. Social Security. The treaty adds less than it seems. Article 20 of the convention exempts from Philippine tax pensions paid from U.S. public funds to a U.S. citizen for governmental service. But the saving clause in Article 6(3) and (4) lets each country tax its own residents as if there were no treaty, and keeps the Article 20 exemption only for individuals who are neither citizens of the Philippines nor hold Philippine immigration status. A retiree on a resident visa, including the SRRV, relies on the domestic rules above rather than on the treaty. Article 19 makes U.S. Social Security paid to a Philippine resident taxable only by the United States. The United States side does not change. A U.S. citizen is taxed by the United States on worldwide income, so military retired pay stays taxable on the U.S. return, and VA disability compensation stays exempt from U.S. tax under 38 U.S.C. 5301. The Philippine Retirement Authority also lists exemption from tax on pensions and annuities among the SRRV's benefits; for a retiree that is the same result the Code already gives.