BIR Ruling [DA-016-05]

January 19, 2005 BIR RULING [DA-016-05] Section 35 (B); BIR Ruling No. DA-007-2004 Ms. Cristina H. Merio Institute for Labor Studies 5/F, DOLE Building Intramuros, Manila M a d a m : This refers to your letter dated November 17, 2004 requesting for a ruling on whether or not you can claim the additional exemption with respect to your illegitimate children. CIAHDT It is represented that you are separated from your husband since 1990 with whom you have one (1) child; that after long years of separation, you decided to have new families of your own; that you are in the process of working out your legal annulment; that you met someone who is willing to take care of you and your son; that you live together as husband and wife, and now have two (2) children fathered by your live-in partner; that at present, you cannot marry him yet until your annulment; that you decided that your two (2) children with your live-in partner follow your maiden name; that all your three (3) children from your husband and your live-in partner are under your care; and that you are now pregnant with your fourth child. In reply, please be informed that Section 35(B) of the Tax Code of 1997 (then Section 29(l)(2) of the old Tax Code) reads as follows: "(B) Additional Exemption for Dependents . There shall be allowed an additional exemption of Eight thousand pesos (P8,000) for each dependent not exceeding four (4). The additional exemption for dependents shall be claimed by only one of the spouses in the case of married individuals. In the case of legally separated spouses, additional exemptions may be claimed only by the spouse who has custody of the child or children: Provided That the total amount of additional exemptions that may be claimed by both shall not exceed the maximum additional exemptions herein allowed. For purposes of this Subsection, a ' dependent ' means a legitimate, illegitimate or legally adopted child chiefly dependent upon and living with the taxpayer if such dependent is not more than twenty-one (21) years of age, unmarried and not gainfully employed or if such dependent, regardless of age, is incapable of self-support because of mental or physical defect." Moreover, Section 2.79.1(A)(5) of Revenue Regulations No. 2-98, as amended provides: "(5) Claimant for exemption for children. The husband is the proper claimant of additional exemptions for qualified children. However, the wife shall claim full additional exemption for children in the following cases: (a) Husband is unemployed; (b) Husband is a non-resident citizen deriving income from foreign sources; (c) The husband waives his right to claim the exemptions of children (waiver should be for all children) in a sworn statement to be attached to his application form for registration (1902) and that of his wife's in accordance with the procedures prescribed in this Section." Section 35(B) of the Tax Code provides that the additional exemptions for dependents shall be claimed by only one of the spouses in the case of married individuals. In the case of legally separated spouses, additional exemptions may be claimed only by the spouse who has custody of the child or children, provided, that the total amount of additional exemptions that may be claimed by both shall not exceed the maximum additional exemptions herein allowed. This is to avoid duplication of claims with respect to additional exemption for dependents. In view of the foregoing, you may claim on top of the personal exemption of P32,000, as "married individual," the additional exemptions of P8,000.00 for each of your qualified children only if (1) they are chiefly dependent upon and living with you; (2) they are not more than twenty-one (21) years of age, unmarried and not gainfully employed or regardless of age, is incapable of self-support because of mental or physical defect; and (3) their father do not claim additional exemptions for them as deductions from their (father's) income (documentary evidence must be submitted for this purpose). This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered as null and void. Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group