BIR Ruling

April 30, 1973 Miss Celia A. Lasem Rm. 204 Catalina Bldg. New York, Quezon City M a d a m : This refers to your letter dated February 19, 1973 which poses the following query: "This is to secure a specific ruling of your office regarding our client, a foreigner who is actually residing abroad but receives income from sources within the Philippines. Records at the Bureau of Immigration show that he is a Permanent Resident of this country but actually residing abroad. Every year he usually comes over to visit relatives and renew friendships which he has developed being a long-time resident of this country. We would like to obtain your ruling as to how we shall classify him for income tax purposes." In reply, I have the honor to inform you as follows: The status of non-resident aliens, for purposes of income tax, is determined on the basis of whether or not they are engaged in trade or business in the Philippines. The amendment effected by R.A. No. 5325 to Subsection (a) of Section 22 of the Tax Code consists of the addition of the proviso therein defining when a non-resident alien is considered engaged in trade or business in the Philippines. The proviso provides that a non-resident alien who comes to the Philippines and stays therein for an aggregate period of more than 180 days during any calendar year shall be considered a non-resident alien doing business in the Philippines. In other words, the criterion as to when a non-resident alien is considered engaged in trade or business in the Philippines is the length of stay therein. Thus, if the aggregate stay of a non-resident alien in the Philippines is more than 180 days during any calendar year, he is considered engaged in trade or business therein. On the other hand, a non-resident alien shall not be considered engaged in trade or business in the Philippines if he stayed in the Philippines for less than 180 days during the year notwithstanding the fact that during each day he actually performed personal services, or engaged in a commercial activity therein. Accordingly, if your client, who is a foreigner, comes to the Philippines and stays therein for an aggregate period of more than 180 days, he is considered a non-resident alien engaged in trade or business therein. His entire net income received from all sources within the Philippines shall be subject to the tax imposed by Section 21 of the Tax Code. (Section 22(a), Tax Code.) However, if your client's stay in the Philippines is less than 180 days, he is considered a non-resident alien not engaged in trade or business in the Philippines, and his gross income from all sources within the Philippines shall be subject to the 30% tax imposed by Section 22(b) in relation to Section 53(b) both of the Tax Code, as amended by Presidential Decree No. 69. aisa dc Very truly yours, (SGD.) CONRADO P. DIAZ Acting Commissioner of Internal Revenue