BIR Ruling

August 31, 1976 Tax Treatment of Foreign Consultants In reply to your letter dated November 21, 1975 requesting the issuance of a tax clearance in favor of Mr. Ralph T. Hitchcock, a consultant engineer for the DPS-IBRD Highway Projects, Department of Public Highways, I have the honor to inform you that pursuant to Presidential Decree No. 150, amending Republic Act No. 4860, as amended, which provides that loan agreements, as well as contracts involving the availment of or utilization of the proceeds of loans, credits or indebtedness obtained under the provisions of this Act, may provide for the exemption from taxes, charges or other levies, and Letter of Instruction No. 128 which, in aiming to secure uniformity in the tax treatment of consultants contracted by the Philippine Government, its agencies, entities and instrumentalities in connection with projects financed with foreign loans, provides: "1. Approval of projects proposed by government agencies shall prescribe the condition that in negotiating tax provisions in consultancy contracts entered into by such agencies in implementation of the foreign loan and involving utilization of loan proceeds, the agency concerned shall agree to provisions exempting consultants from taxes and duties unless otherwise indicated by the consultants." the incorporation of Article VI into the contract agreement involving utilization of World Bank financial assistance for the construction of the Manila North Road, entered into between the Philippine government and the Engineering & Development Corporation of the Philippines, in association with Louis, Berger, Incorporated, whereby the Government assumed the burden of taxes, whether national or local, duties, or levies, if any, payable on any and all compensations, payments, reimbursements on or expenses undertaken to be paid or assumed by the Government in favor of the consultant and its expatriate personnel and whereby it undertakes to provide or to be provided to the Consultant and its expatriate personnel, the necessary taxes, customs and other clearances for purposes for which any of the same may be demanded by any Government officer or court from the consultant and its expatriate personnel during their stay in the Philippines or on the occasion of their departure from the Philippines, was made in accordance with law. Accordingly, Mr. Hitchcock, being an expatriate personnel of the consultant, is exempt from all taxes, duties and levies and a tax clearance will be issued in his favor. cdtech The Receivable Accounts Division has been informed of this ruling.