BIR Ruling

January 17, 1973 Mr. Pedro C. Calvelo P. O. Box No. 10 Gumaca, Quezon S i r : This refers to your letter dated December 8, 1972 stating that your sister who is presently residing with her entire family in the United States as American citizens is the owner of a lot situated in Makati, Rizal which is rented by Shell Company in the amount of P7,920.00 per annum. Under the foregoing circumstances, you would like to be informed of the following: "1. Are we subject to pay P150.00 annually as fixed tax for leasing the lot? "2. Before paying the income tax, is the owner entitled to claim as deduction the following: a. P3,000.00 for the husband and wife? b. P1,000.00 pertaining to a child who cannot walk (paralyzed). c. P192.00 as real estate tax." In reply, I have the honor to inform you that as owner of a real property which is rented for P7,920.00 per annum, your sister is a real estate dealer subject to the annual fixed tax of P150.00 prescribed in Section 182(A) (3) (aa) of the Tax Code. Under Section 23(e) of the Tax Code, a nonresident alien individual engaged in trade or business in the Philippines shall be entitled to personal exemption in an amount equal to the exemptions allowed by the income tax law in the country of which he is a subject or citizen to citizens of the Philippines not residing in such country, but not to exceed the amount fixed in said section as exemption for citizen or residents of the Philippines. And under Section 673(d) of the US Internal Revenue Code of 1954, the personal exemption allowed by the United States income tax law to Filipinos who are neither citizens nor residents of the United States is $600. Considering the exchange value of a dollar to a peso which is P6.78 to $1.00, your aforesaid sister who is a nonresident American deriving income in the Philippines is allowed P3,000.00 exemption as married or as a head of family. Moreover, she is entitled to avail of the itemized deductions under Section 30 of the Tax Code. However, she is not allowed additional exemptions for her dependents. acd Very truly yours , (SGD.) MISAEL P. VERA Commissioner of Internal Revenue