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Contractor of Record in the Philippines
Engage and pay Filipino contractors through Aniday's in-country partner entity
Under a Contractor of Record (COR) arrangement, Aniday's partner entity in the Philippines becomes the contracting party with your independent contractor. We run the classification check against the Supreme Court's four-fold test, sign a compliant contract for services, withhold and remit the expanded withholding tax as a Philippine payer must, and pay in pesos — while your contractor keeps working directly with your team. You get the talent without a Philippine entity, and without the regularisation risk sitting on your books.
Not sure whether the role is a contractor or an employee? Read the Doing Business in the Philippines guide, or compare with EOR in the Philippines for full-time hires.
Philippines' Employment Snapshot
What is a Contractor of Record in the Philippines?
Philippine courts decide who is an employee with the four-fold test — selection and engagement, payment of wages, power of dismissal, and above all the power of control over the means and methods of the work — backed by an economic-dependence test. Labels don't matter; facts do. A Contractor of Record is a local company — here, Aniday's partner entity in the Philippines — that signs the contract for services with the contractor on your behalf, withholds the expanded withholding tax as the BIR requires of a Philippine payer, and carries the classification liability.
COR is the right fit for genuinely independent work: project-based specialists, part-time advisers, fractional roles and consultants who set their own hours and serve other clients. If the role is full-time, supervised and permanent, it is employment — use Employer of Record in the Philippines instead. We tell you which one applies before you sign anything.
Aniday Philippines (through our partner entity)
Our Address: Manila, Philippines
(contracting party, payer, withholding agent, compliance owner)
What Aniday's Contractor of Record covers in the Philippines
Everything between "we found the person" and "the person has been paid, on time, with the right paperwork".
Classification check against the four-fold test
Before onboarding we test the role for control over means and methods, fixed schedules, disciplinary rules, exclusivity and economic dependence — the factors the NLRC and the Supreme Court weigh. If the answer is "employee", we say so and route the role to EOR.
A compliant contract for services, signed by our partner entity
English, enforceable, and built around deliverables rather than hours: fees, confidentiality, non-exclusivity and a written copyright assignment — because under Section 178.4 of the IP Code the creator keeps copyright in a commissioned work unless there is a written stipulation to the contrary.
Invoicing in USD, payment in PHP
One invoice from Aniday to you in USD; InstaPay or PESONet transfer in pesos to the contractor's bank, GCash or Maya account on the agreed cycle. No PayPal fees, no conversion surprises on the contractor's side.
Expanded withholding tax withheld, remitted and certified
A Philippine payer must withhold 5% or 10% on professional fees to individuals. Our partner entity collects the contractor's sworn declaration and BIR registration, applies the right rate, remits it and issues BIR Form 2307 so the contractor claims the credit on their return.
Regularisation liability sits with Aniday
If a contractor engaged under our COR is later found to be an employee, the back 13th-month pay and leave, the retroactive SSS, PhilHealth and Pag-IBIG contributions and any illegal-dismissal award are our problem to resolve, not yours — that is what the fee pays for.
Convert to an employee when the role grows
When a contractor becomes full-time, we move them onto an employment contract under our Philippines EOR with SSS, PhilHealth, Pag-IBIG, 13th-month pay, leave and AEP sponsorship where needed — same contact, same platform.
Contractor rules in the Philippines at a glance
The facts that decide whether a contractor engagement in the Philippines is clean. All figures are the current rules as of September 2026; sources are listed below the table.
| Topic | Philippines rule |
|---|---|
| Employee vs contractor | The four-fold test from Supreme Court jurisprudence: (1) selection and engagement, (2) payment of wages, (3) power of dismissal, (4) power of control over the means and methods of the work — control being decisive — plus economic dependence on the hirer. DOLE Department Order 174-17 governs job contracting and prohibits labour-only contracting where a company supplies people to a principal; a genuine independent professional engaged for their own services sits outside it. The Freelance Workers Protection Act remains a bill, not law. |
| Who can be a contractor | Filipino citizens and residents. Foreign nationals may only work for the employer named on their Alien Employment Permit and work visa, so a foreign professional cannot freelance — that role needs an AEP under an employer. |
| Income tax | Graduated rates of 0% to 35%, with the first ₱250,000 of taxable income exempt. A non-VAT contractor with gross receipts of ₱3 million or less may instead elect 8% on gross receipts above ₱250,000, in lieu of graduated income tax and the 3% percentage tax. Quarterly returns (1701Q) and an annual return (1701 or 1701A) by 15 April. |
| Withholding on the payer | A Philippine payer withholds expanded withholding tax on professional fees to individuals: 5% if the contractor's gross income for the year is ₱3 million or less and they file a sworn declaration with their BIR registration by 15 January, otherwise 10% (RR 11-2018). BIR Form 2307 evidences the credit. Non-resident aliens not engaged in trade: 25% final. A foreign payer with no Philippine presence has no withholding duty — the contractor self-assesses. |
| VAT | 12% VAT; registration is compulsory only once gross receipts exceed ₱3 million a year. Below that a contractor pays 3% percentage tax, or nothing extra under the 8% option. Services to non-resident clients paid in acceptable foreign currency can be zero-rated where the conditions are met. |
| Social security | No employer SSS, PhilHealth or Pag-IBIG for contractors. Self-employed and voluntary SSS membership costs 15% of the monthly salary credit (₱5,000–₱35,000), plus ₱10–30 employees' compensation and a provident-fund share above ₱20,000; PhilHealth self-earning members pay 5% of declared income within the floor and ceiling; Pag-IBIG membership is voluntary. |
| Intellectual property | Section 178.4 of the Intellectual Property Code (RA 8293): for a commissioned work, the person who commissioned it owns the work itself but copyright remains with the creator unless there is a written stipulation to the contrary. Aniday's contract includes that stipulation — an assignment of copyright and other IP to you and a licence for pre-existing materials. |
| Invoicing | Contractors register with the BIR (Form 1901, certificate of registration) and issue BIR-registered invoices — since the Ease of Paying Taxes Act (RA 11976, 2024) the invoice, not the official receipt, is the principal document for services. Mandatory e-invoicing under the EIS covers large taxpayers, e-commerce, exporters and computerised-system users, with compliance extended to 31 Dec 2026; individual contractors are not yet in scope. |
| Currency and payment | No restriction on receiving inward foreign currency; banks convert to pesos at their rate. Aniday's partner entity pays in PHP by InstaPay or PESONet to bank, GCash or Maya accounts. PayPal, Payoneer and Wise all pay out to Philippine accounts if you pay directly, at the contractor's cost. |
| Data protection | Data Privacy Act of 2012 (RA 10173), enforced by the National Privacy Commission: lawful processing criteria, controller and processor duties, breach notification within 72 hours, and registration of data-processing systems above the thresholds. Aniday is the personal information controller for contractor data it collects. |
| If it goes wrong | A finding of employment regularises the worker: back 13th-month pay, service incentive leave, holiday and overtime pay, retroactive SSS, PhilHealth and Pag-IBIG contributions with penalties (and criminal liability for wilful non-remittance of SSS under RA 11199), and reinstatement with backwages if the engagement ended. A foreign company also risks a "dependent agent" permanent establishment if a contractor habitually concludes contracts on its behalf. |
Sources. Labor Code, Department Order 174-17 and Alien Employment Permit rules from the Department of Labor and Employment; graduated rates, the 8% option, RR 11-2018 withholding, the ₱3 million VAT threshold and the EIS e-invoicing regulations from the Bureau of Internal Revenue; self-employed contributions from the Social Security System, PhilHealth and Pag-IBIG Fund; Section 178.4 of RA 8293 from IPOPHL; the Data Privacy Act from the National Privacy Commission; bill status from the Senate of the Philippines. Last verified 2026-09.
How Contractor of Record works in the Philippines
Three steps take you from "we want to engage this person" to the contractor's first payment.
Status check and contract
We test scope, hours, supervision and exclusivity against the four-fold test to confirm COR is the right vehicle, then Aniday's partner entity signs the contract for services with the contractor covering deliverables, fees, confidentiality, copyright assignment, data-handling and termination terms.
Onboarding and paperwork
We onboard the contractor: identity check, TIN and BIR registration, the sworn declaration for the 5% rate, and bank or e-wallet details, all filed into a compliance pack you can hand to your auditors.
Work, payment and withholding
The contractor works with your team and issues BIR-registered invoices to our partner entity, and approved invoices roll into a single Aniday invoice to you in USD. The contractor is paid in PHP on the agreed cycle with expanded withholding tax withheld and remitted, and Form 2307 and annual summaries are kept for the BIR and for you.
COR, EOR or contractor management software — which one in the Philippines?
| Contractor of Record | Employer of Record | Contractor management software | |
|---|---|---|---|
| Who is the counterparty | Aniday's partner entity in the Philippines contracts with the contractor | Aniday's partner entity in the Philippines employs the person | You contract directly; the tool only handles documents and payouts |
| Best for | Project work, part-time specialists, advisers, fractional roles | Full-time, supervised, ongoing roles; foreign hires needing an AEP | Companies that already have counsel, an entity or a risk appetite for classification |
| Classification risk | Assessed by Aniday; liability carried by Aniday | None — the person is an employee | Stays with you |
| Withholding, SSS, 13th month, leave | Expanded withholding tax withheld by our partner entity; no SSS or 13th month | Compensation withholding, SSS, PhilHealth, Pag-IBIG, 13th-month pay, leave and notice handled | Not withheld — the contractor self-assesses, and nobody checks |
| Convert later | Contractor → EOR employee in days | — | Manual |
🇵🇭 FAQs about Contractor of Record in the Philippines
Can I hire a contractor in the Philippines without a local company?
Yes. A foreign company can contract directly with a Filipino contractor, and many do through PayPal or Wise, but it then has no withholding agent in the Philippines, the contractor carries the whole BIR burden, and the classification exposure sits with you. Under Aniday's Contractor of Record, Aniday's partner entity in the Philippines is the contracting party and the withholding agent, so you need no Philippine entity and the compliance sits with a local company.
Do I have to withhold tax when paying a Filipino contractor?
If the payer is in the Philippines, yes: expanded withholding tax on professional fees at 5% where the contractor's gross income for the year is ₱3 million or less and they have filed a sworn declaration, otherwise 10%, under RR 11-2018, evidenced by BIR Form 2307. A foreign payer with no Philippine presence has no withholding duty, and the contractor self-assesses. Our partner entity collects the declaration, applies the right rate, remits it and issues the 2307.
How do Philippine courts decide whether my contractor is really an employee?
With the four-fold test: who selected and engaged the person, who pays them, who can dismiss them, and — decisively — who controls not just the result but the means and methods of the work. Fixed schedules, performance ratings tied to discipline, exclusivity and dependence on one client all point to employment, which is why platform riders have been held to be employees. A contract for services holds up when the contractor decides how the work is done, is paid per deliverable, uses their own tools and serves other clients. Aniday's assessment checks those facts before the contract is signed.
Who owns the work my contractor produces?
Without a written stipulation, the contractor keeps the copyright. Section 178.4 of the IP Code gives the commissioning party ownership of the physical work but leaves copyright with the creator unless the parties agree otherwise in writing. Aniday's contract for services includes an assignment of copyright and other IP to you and a licence for the contractor's pre-existing materials, so ownership is settled before the first deliverable.
Should the contractor use the 8% option, and do they need to charge VAT?
Most solo contractors with gross receipts of ₱3 million or less elect the 8% tax on gross receipts above ₱250,000, which replaces both graduated income tax and the 3% percentage tax and simplifies quarterly filing; those with heavy deductible expenses may prefer graduated rates. VAT registration is compulsory only once receipts exceed ₱3 million, and services to non-resident clients paid in foreign currency can be zero-rated. The election is the contractor's; we record it so the withholding and invoices match.
What happens if the contractor is found to be an employee?
The worker is regularised, and the hirer owes back 13th-month pay, service incentive leave, holiday and overtime pay, retroactive SSS, PhilHealth and Pag-IBIG contributions with penalties — wilful non-remittance of SSS is a criminal offence under RA 11199 — and, if the engagement was ended, reinstatement with full backwages for illegal dismissal. Under our COR that exposure sits with Aniday's partner entity as the contracting party — and our four-fold-test assessment is designed to stop the engagement being set up that way in the first place.
Is there a freelancer law in the Philippines I need to comply with?
Not yet. The Freelance Workers Protection Act — which would require written contracts, timely payment and hazard pay for freelancers — passed the House in the 19th Congress but was not enacted, and has been refiled in the 20th Congress. As of September 2026 it remains a bill. Aniday's contract for services already provides what the bill asks for: written terms, agreed payment dates and a dispute clause. We'll update this page if it becomes law.
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