BIR Ruling [DA-217-96]

June 27, 1996 BIR RULING [DA-217-96] Joaquin Cunanan & Co. 8th Flr., BA Lepanto Bldg. 8747 Paseo de Roxas Makati City Attention: Ms . Tomasa H . Lipana Partner Gentlemen : This refers to your application for relief from double taxation relative to the remuneration/compensation income derived by your client, MR. YOZHABU OKA, for services rendered in the Philippines. cdta It is represented that Mr. Yozhabu Oka is a resident of Japan and an employee of IBM Japan, Ltd., a corporation organized and domiciled in Japan, which does not have a permanent establishment or a fixed base in the Philippines; that said Mr. Oka was assigned by IBM Japan to provide technical support to its supplier, IONICS Circuit, Inc., a domestic corporation, for the period September 12, 1994 to September 8, 1995; that he arrived in the Philippines on August 9, 1994 but that for the taxable year 1994, the aggregate number of days of his stay in the Philippines totalled only to 120 days and that considering that the said stay is not more than 183 days and his compensation was paid entirely and borne by IBM Japan, Ltd., his said compensation income derived in the Philippines for 1994 should be exempt from Philippine income tax. In reply,, please be informed that paragraphs 1 and 2, Article 15 of the RP-Japan Tax Treaty provides as follows: "Article 15 "(1) Subject to the provisions of Articles 16, 18, 19, 20 and 21, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that Contracting State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other Contracting State. "(2) Notwithstanding the provisions of paragraph (1), remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned Contracting State IF: "(a) the recipient is present in that other Contracting State for a period or periods not exceeding in the aggregate 183 days in the calendar year concerned, and "(b) the remuneration is paid by or on behalf of, an employer who is not a resident of that other Contracting State, and "(c) the remuneration is not borne by a permanent establishment or a fixed base which the employer has in that other Contracting State." In view of the foregoing provisions of the RP-Japan Tax Treaty, and considering that Mr. Yozhabu Oka stayed in the Philippines for an aggregate of 120 days only for the taxable year 1994, and his compensation was paid entirely borne by IBM Japan, Ltd. it is our opinion that the gross compensation income or any income earned from all other sources within the Philippines in connection with the project for the taxable year 1994 by said MR. YOZHABU OKA of IBM Japan, Ltd. is not subject to Philippine income tax. 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, and/or any of the requirements imposed in this letter are not complied with, then this ruling shall be considered null and void. Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)