BIR Ruling

April 3, 1973 Mr. Filomeno P. Bustillos Acting Administrative Officer Embassy of the Philippines Phnom-Penh, Cambodia S i r : This refers to your letter dated February 8, 1973 requesting information on the following queries, viz: "Some non-resident Filipino citizens who are dollar earners here in Phnom-Penh would like to know if they have to file both BIR Form Nos. 1701A and 1701-C and at the same time avail of the deductions provided in Revenue Memorandum Circular Nos. 40-71 and 41-71 both dated 20 December 1971. "As regards BIR Form No. 1745, if they have no previously untaxed income and/or wealth do they need to file this form?" In reply thereto, I have the honor to inform you as follows: If the non-resident Filipino citizens mentioned in your query are deriving income from sources within and without the Philippines, they should file two(2) returns, namely: (a) BIR Form No. 17.01 or BIR Form No. 17.01-A, for income derived from sources within the Philippines, if said income amounts to P1,800.00; and (b) BIR Form No. 17.01-C, for income derived from sources without the Philippines. (Rev. Memo. Cir. No. 17-73 dated January 12, 1973 implementing Presidential Decrees No. 69) A non-resident citizen whose annual gross income from sources within the Philippines does not amount to P1,800.00 need not report said income. However, if he derives income from sources outside the Philippines, he should report said income, regardless of the amount thereof, in BIR Form No. 17.01-C (Ibid) Income derived by them from sources within the Philippines shall be taxed in accordance with the provisions of the Tax Code applicable to resident citizens and resident aliens. Accordingly, their net income from Philippines sources shall be subject to the rates or tax prescribed in Section 21 of the Tax Code. And since this kind of income is taxable in the same manner and at the same rate as the income of resident citizens and resident aliens, they may deduct from such income all the items allowable under Section 30 of the Tax Code, and claim the personal and additional exemptions provided for in Section 23 of the same Code. Income derived by them from sources without or outside the Philippines shall be taxed at the graduated rates ranging from 1% to 3%, which shall be based on the gross amount of such income. The tax on this kind of income being based on gross amount thereof, no deduction whatever shall be allowed. Neither can the taxpayer claim personal and additional exemptions in connection with said income, for to allow such exemptions would in effect change the "gross-income" basis of the tax. And considering that this kind of income is given a special tax treatment, the taxpayer is not allowed to claim tax credit for income tax paid thereon to any foreign government. (Id.) In this connection, you are also informed that non-resident Filipino citizens are no longer allowed the special deductions from gross income as provided for by Revenue Memorandum Circular Nos. 40-71 and 41-71 both dated December 20, 1971. Said Revenue Memorandum Circulars are deemed revoked by Presidential Decree No. 69. Finally, if a Filipino who is residing and working abroad has no previously untaxed income or wealth as of December 31, 1971, he is not required to file BIR Form No. 1745. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue