BIR Ruling

March 28, 1969 The Chief of Mission Philippine Reparation Mission 46 Nempeidai-machi, Shibuya-ku Tokyo, Japan S i r : This refers to your letter dated April 3, 1968 requesting that the Mission personnel be allowed to file their returns and to pay the income taxes due thereon in the Philippines, and for specific instructions on the taxes withheld from the Mission personnel deposited with the Bank of Tokyo, Ltd., Japan. The Mission as an employer is by law required to deduct and withhold from the basic salaries of its personnel the corresponding taxes from each wage payment based upon the withholding tax table prescribed by the Government; that in a letter to the Mission dated October 19, 1967, this Office ruled that the Mission should not deposit or keep in trust, but should remit and pay to the Bureau of Internal Revenue the tax deducted and withheld from the basic salaries of its personnel within the time prescribed by Article 4 of the Withholding Tax Law; that the amount deducted had been deposited in the Bank of Tokyo Ltd., Japan, awaiting disposition by the Commissioner of Internal Revenue of the Philippines; that there is no way by which this amount could be remitted to the Philippines without violating the Reparations Agreement between Japan and the Philippines and the Monetary Laws of Japan; that the Reparations Agreement provides that the expenses of the Mission received from the Japanese Government from which the salaries of the personnel are taken, can in no case be remitted abroad; and that under the Foreign Exchange Law of Japan, the salaries of the Mission personnel received in Japanese yen are inconvertible into other currencies. Article 4 of the Withholding Tax Law requires the employer to pay to the Bureau of Internal Revenue the tax deducted and withheld from the basic salaries of its personnel within the time prescribed therein. However, you have indubitably shown that this requirement is not possible of compliance. In view of the foregoing, your suggestion that "the Mission personnel be allowed to file their income tax returns in the Philippines and pay the corresponding dues thereat, and whatever amount has been collected by this Office from their salaries and wages will be refunded to them upon presentation of the receipts issued by the Bureau of Internal Revenue showing that payment was already made', provides a most practical solution and is, therefore, acceptable to this Office. Accordingly, the Mission personnel may be advised to file their income tax returns corresponding to the period or periods covered by the taxes already withheld and now deposited with the Bank of Tokyo, Ltd. and pay the tax due and payable accordingly. You may then liquidate the deposited withheld taxes upon their presentation of the corresponding receipts evidencing payment of the taxes corresponding thereto. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue