BIR Ruling [DA-109-03]

April 4, 2003 BIR RULING [DA-109-03] Sec. 22 (DD); RR 2-98; 007-99 Habitat for Humanity International, Inc. East/Southeast Asia Regional Office 25/F Unit 2503 Jollibee Plaza Building Emerald Avenue, Ortigas Complex Pasig City Attention: Ms. Jocelyn V. Manipol Finance and Administration Manager Gentlemen : This refers to your letter dated May 21, 2001 requesting for clarification if Habitat for Humanity International-East/Southeast Asia Regional Office can be classified as a regional or area headquarters of a multinational company so that gross income of its alien individual employees occupying managerial and technical positions shall be subject to a final tax of fifteen percent (15%). It is represented that Habitat for Humanity International-East/Southeast Asia Regional Office is a non-stock and non-profit organization incorporated under the laws of the United States of America; that it has been licensed to transact business under SEC License No. A199811066 dated August 19, 1998; and that as a branch office in the Philippines, it acts as a coordinator and communication center for its Asian operations. In reply thereto, please be informed that pursuant to Section 22(DD) of the Tax Code of 1997, the "term regional or area headquarters shall mean a branch established in the Philippines by multinational companies and which headquarters do not earn or derive income from the Philippines and which act as supervisory, communications and coordinating center for their affiliates, subsidiaries, or branches in the Asia-Pacific Region and other foreign markets." (Emphasis supplied) Such being the case, as a branch office which acts as a coordinator and communication center for its Asian operations, Habitat for Humanity International-East/Southeast Asia Regional Office falls under the term regional or area headquarters. Section 2.57.1(D) of Revenue Regulations No. 2-98, as amended, implementing Section 25(C) of the Tax Code of 1997 provides, viz. : "(D) Income Derived by Alien Individuals Employed by Regional or Area Headquarters and Regional Operating Headquarters of Multinational Companies . A final withholding tax equivalent to fifteen percent 15% shall be withheld by the withholding agent from the gross income received by every alien individual occupying managerial and technical position in regional or area headquarters and regional operating headquarters and representative offices established in the Philippines by multinational companies as salaries, wages, annuities, compensation, remuneration, and other emoluments, such as honoraria and allowances, except income which is subject to the fringe benefit tax, from such regional or area headquarters and regional operating headquarters." (Emphasis supplied) Thus, alien employees occupying managerial and technical positions in Habitat for Humanity International-East/Southeast Asia Regional Office which is a branch office of Habitat for Humanity International, Inc., U.S. shall be taxed at the rate of 15% on income received from such office, such as salaries, wages, annuities, compensation, remuneration, and other emoluments, such as honoraria and allowances, except income which is subject to the fringe benefit tax, pursuant to the aforequoted Section 2.57.1(D) of Revenue Regulations No. 2-98, as amended. ( BIR Ruling No. 007-99 dated January 18, 1999 ) 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 null and void. Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group