BIR Ruling

January 21, 1968 Joaquin Cunanan & Co. Certified Public Accountants San Martin Building 1564 A. Mabini, Manila Attention: Mr . Joaquin Cunanan Gentlemen : This refers to your letter dated November 22, 1968 requesting information on a query stated as follows: "Republic Act No. 5423 amended Sections 24 and 53 of the Tax Code by including 'remunerations for technical services or otherwise' among the income of non-resident foreign corporations subject to income tax and withholding tax. "The question raised by some of our clients is: Have the amendments the effect of making all remunerations for technical services paid to non-resident foreign corporations taxable regardless of whether the technical services were performed in the Philippines or in foreign countries?" In reply, I have the honor to inform you that pursuant to Section 24(b)(1) of the Tax Code, as amended by Republic Act No. 5431 (not 5423), the income of a foreign corporation not engaged in trade or business in the Philippines derived from all sources within the Philippines , as interests, dividends, rents, royalties, salaries wages, pensions, annuities, compensations remunerations for technical services or otherwise , emoluments or other fixed or determinable annual, periodical or casual gains, profits and income, and capital gains are subject to a tax equal to 35% of the amount received by such foreign corporation . Section 24(b)(1) as amended qualified the term "remunerations" by the addition of the phrase after it reading "for technical services or otherwise". Accordingly, remittances abroad of remunerations to the foreign corporations for technical services, regardless of the place or country where such technical services were supposedly performed are now subject to Philippine income tax. In view thereof, this Office is of the opinion and so holds that non-resident foreign corporations shall be subject to Philippine income tax at the increased rates prescribed by Republic Act No. 5431 on remunerations paid and received by them for technical services performed whether in the Philippines or abroad beginning July 1, 1968. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue