If you’re a US-based business looking to hire Filipino virtual assistants, you’ve probably heard both terms thrown around like they mean the same thing. They don’t.
The difference matters more than you think. Get it wrong, and you could end up dealing with tax headaches, compliance issues, or just a setup that doesn’t match what you’re actually trying to do.
Let me break this down in a way that actually makes sense.
Outsourcing Defined in Simple Terms
Outsourcing is when you contract out specific work to a third party. You’re not hiring an internal team member per se. When you outsource for Filipino virtual assistants, you’ll typically work with an independent contractor or going through an agency that provides virtual assistants as a service.
In these cases, hiring through a platform such as HireTalent.ph or directly contracting with a Filipino VA is the best approach. It’s simply you paying for the service, you get the output and that’s pretty much
What is Offshoring ?
Offshoring is different. It’s when you move part of your business operations to another country it’s the best choice if you’re thinking of scaling your business.
The logic behind it is simple: get huge savings with significantly lower salaries (compared to domestic) and tax incentives offered by the Philippine Government.
This practice is often seen in industries such as business processing and healthcare.
Why Companies Choose the Philippines
The Philippine government has actively supported this industry through workforce development programs like the Philippine Skills Framework, which aligns local talent with international standards in logistics, IT, and creative services.
The E-Commerce Philippines 2022 Roadmap pushed digitization efforts that made remote work infrastructure even stronger and even the World Bank recognizes the Philippines as one of the top destinations globally for digital services exports.
The projection from IBPAP puts the IT-BPM sector at nearly 39 billion USD in revenue by 2028, growing over 7% annually.
In 2021, the Department of Trade and Industry reported that the IT-BPM sector brought in over 724 billion pesos in approved investments and created more than 82,000 jobs.
How Taxes Work When Hiring Filipino Virtual Assistants
When you hire a Filipino VA as an independent contractor and you don’t have a business presence in the Philippines, you’re not legally bonded with Philippine employer tax obligations.
From the IRS side, payments to overseas independent contractors are treated as a business expense under Section 162. You’re not withholding FICA or income tax because they’re not your employees.
One thing to note from the Bangko Sentral ng Pilipinas is that cross-border transfers over 10,000 USD need to be declared through a Currency Declaration Form, but they’re perfectly legal and routine for contractor payments.
If you’re offshoring and directly employing people in the Philippines, the rules change. You’ll need to register your business presence here, follow local employment law, and handle payroll according to Philippine standards.
That’s a heavier lift, but it comes with benefits like qualifying for tax incentives under The CREATE law if you register with the Philippine Economic Zone Authority or The Board of Investments.
What You Need to Know About Data Privacy and Compliance
The National Privacy Commission enforces RA 10173, the Data Privacy Act, which applies to BPOs and virtual assistants handling personal data from abroad.
Cross-border data transfers require compliance with specific obligations, especially if you’re dealing with sensitive information.
On the US side, if you’re in a regulated industry like healthcare or finance, you need to make sure your contractors or offshore team members understand and comply with HIPAA, FINRA, or whatever regulations apply to your sector.
Best Way to Pay Filipino Virtual Assistants
Paying Filipino VAs has gotten significantly easier over the past few years with platforms such as ManagePh that incorporates Fintech platform Wise for transparent fees and fast wire transfers.
The BSP regulates cross-border remittances, but as long as you’re making legitimate business payments, there’s no issue. Just be aware that amounts over 10,000 USD require declaration.
For companies managing multiple contractors, consider using a platform with batch scheduling, time tracking and document management all designed to save time and reduce errors.
If you’re going with the offshore route simply let your HR team handle the process.
Frequently Asked Questions
What is the main difference between outsourcing and offshoring when hiring Filipino virtual assistants?
Outsourcing means contracting specific tasks to an external party, like an independent Filipino VA or an agency, without adding them to your payroll. Offshoring involves establishing your own business operations in the Philippines by setting up a subsidiary, opening a physical office, or directly employing Filipino workers as part of your company structure.
Do US companies need to pay Philippine taxes when hiring Filipino virtual assistants as independent contractors?
No, US companies hiring Filipino VAs as independent contractors without a business presence in the Philippines are not subject to Philippine employer tax obligations. From the IRS perspective, payments to overseas independent contractors are treated as business expenses under Section 162, and you don’t withhold FICA or income tax.
When should a US company choose offshoring over outsourcing for Filipino virtual assistants?
Offshoring makes sense when you need to scale operations and look to save up on salaries in the process. By setting up a Philippine entity through PEZA or BOI to qualify for tax incentives under CREATE law.