Mr. Gil George Miranda

January 23, 2008 BIR RULING [DA-031-08] Sections 22 (E) (3) & 23 (C); BIR Ruling No. 013-03 Mr. Gil George Miranda 18 M. Aquino St., Corazonville Subd. Tandang Sora, Quezon City S i r : This refers to your letter dated November 5, 2007 requesting for a ruling that you qualify as a non-resident citizen during your stay abroad and, therefore, exempt from payment of income tax and consequently, withholding tax. As represented, you were a former employee of RCGIT Philippines. You were assigned by your former employer to the United States where you stayed for more than 183 days. In reply, please be informed that Section 22 (E) (3) of the NIRC provides one of the definitions of the term 'non-resident citizen' of the Philippines, viz .: "(3) A citizen of the Philippines who works and derives income from abroad and whose employment thereat requires him to be physically present abroad most of the time during the taxable year." DSHcTC Moreover, this Office had occasion to rule in BIR Ruling No. 013-2003 dated October 13, 2003, as follows: IaAEHD "The regular employees you send to Phnom Penh, Cambodia to supervise the construction of the water supply project of said country may qualify as 'nonresident citizens' of the Philippines under Section 22(E)(3) of the NIRC of 1997, supra. , if their employment requires them to be present in that foreign country most of the time during the taxable year, i.e., they stay there for at least one hundred eighty-three (183) days or more. The fact that their salaries are paid here in the Philippines does not mean that they do not derive income from abroad as the situs of compensation income is the place where the services are rendered pursuant to Section 2.78.1 of Revenue Regulations No. 2-98, to wit: 'Sec. 2.78.1 Withholding of Income Tax on Compensation Income. xxx xxx xxx (10) Compensation for services performed outside the Philippines. Remuneration for services performed outside the Philippines by a resident citizen of the Philippines for a domestic or a resident foreign corporation or partnership, or for a non-resident corporation or partnership, or for a non-resident individual not engaged in trade or business in the Philippines shall be treated as compensation which is subject to tax. A non-resident citizen as defined in these regulations is taxable only on income derived from sources within the Philippines. In general, the situs of the income whether within or without the Philippines, is determined by the place where the service is rendered.' TcDAHS In view of the foregoing, said employees are not subject to income tax. Section 23(C) of the NIRC of 1997 provides: "(C) An individual citizen of the Philippines who is working and deriving income abroad as an overseas contract worker is taxable only on income from sources within the Philippines. . . ." DHITCc Accordingly, you are considered a non-resident citizen since your services were rendered abroad for more than 183 days and, therefore, exempt from payment of Philippine income tax. In this connection, the phrase "most of the time" which is used in determining when a citizen's physical presence abroad will qualify him as non-resident, shall mean that the said citizen shall have stayed abroad for at least 183 days in a taxable year [Section 2 (c), Revenue Regulations No. 1-79]. 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.) GREGORIO V. CABANTAC Deputy Commissioner