BIR Ruling

August 12, 1971 His Excellency Lars Onsager Ambassador Royal Norwegian Embassy Manila S i r : This refers to your letter dated June 3, 1971 requesting information on the question of double taxation regarding the payment of income tax by Philippine sailors on board Norwegian ships. You would like to be advised on the following points: acd "1. Can a Filipino seaman in his Income Tax Declaration always claim credit for Norwegian income tax already deducted from his salary? "2. If the Norwegian income tax already deducted is higher than the Philippine tax, will the seaman then have a claim against the Philippine tax authorities? "3. Are the Philippine Tax Authorities aware that the seamen, on filing with the Norwegian Tax Authorities his Philippine Individual Income Tax Return, gets repayment of all Norwegian tax as deducted from his salary as a seaman, or do the Philippine Tax Authorities assume that the seamen will be refunded only the difference between the Norwegian Seamen's Tax and the Philippine Tax. "4. Does the Credit Provision in Section C, 7 a, mean that the seamen can be credited only on the condition that he has no claim for repayment of foreign tax already deducted from his salary". In reply thereto, I have the honor to inform you as follows: 1. The Filipino seaman may claim the benefit of tax credit for any income tax, war-profits and/or excess-profits tax paid by him to any foreign country provided he signify in his Philippine income tax return his desire to avail of such credit, or claim such payment as deduction in his Philippine income tax return if he does not signify to that effect. (Sec. 30(c) (1), (B) & (3) (B), N.I.R.C.) If the taxpayer signifies in his return his desire to have the benefits of tax credit, the tax imposed under Title II of the Philippine National Internal Revenue Code shall be credited with "(A) Citizen and domestic corporation . In the case of a citizen of the Philippines . . . the amount of any income . . . taxes paid or accrued during the taxable year to any foreign country"; (Section 30(c) (A), Tax Code). The benefits of tax credit is, however, subject to the following limitations under Section 30(c) (4), viz: "(A) The amount of the credit in respect to the tax paid or accrued to any country shall not exceed the same proportion of the tax against which such credit is taken, which the taxpayer's net income from sources within such country taxable under this Title bears to his entire net income for the same taxable year; "(B) The total amount of the credit shall not exceed the same proportion of the tax against which such credit is taken, which the taxpayer's net income from sources without the Philippines taxable under this Title bears to his entire net income for the same taxable year." 2. The Filipino seaman is only allowed credit for payment of income tax imposed by a foreign country in the proportionate amount as above provided, and if the Norwegian tax already deducted is higher than the Philippine income tax, the Filipino seaman has no claim against the Bureau of Internal Revenue for the difference. 3. The Philippine Bureau of Internal Revenue is not aware that the Filipino seaman gets repayment of all Norwegian taxes as deducted from his salary upon filing with the Norwegian Tax Authorities of his Philippine Income Tax Return nor does it assume that the Filipino seaman will be refunded only the difference between the Norwegian seamen's tax and the Philippine income tax, because it is provided under Section 30(c) (5) the following: "(5) Adjustment on payment of accrued taxes . If accrued taxes when paid differ from the amounts claimed as credits by the taxpayer, or if any tax paid is refunded in whole or in part, the taxpayer shall notify the Commissioner of Internal Revenue, who shall redetermine the amount of the tax for the years or years affected, and the amount of such tax upon redetermination, if any, shall be paid by the taxpayer upon notice and demand by the Commissioner, or the amount of tax overpaid, if any, shall be credited or refunded to the taxpayer. In the case of such a tax accrued but not paid, the Commissioner as a condition precedent to the allowance of his credit may require the taxpayer to give a bond with sureties satisfactory to and to be approved by the Commissioner in such sum as he may require, conditioned upon the payment by the taxpayer of any amount of tax found due upon any such redetermination. The bond herein prescribed shall contain such further conditions as the Commissioner may require. (4) Finally, it appearing from your representation that the Norwegian government will refund the withheld tax to the Filipino seamen upon filing their Philippine income tax return with the Norwegian authorities, this Office shall from hereon disallow any tax credit claim for Norwegian income tax as no such tax shall have been paid by them. acd Very truly yours, MISAEL P. VERA Commissioner of Internal Revenue