BIR Ruling [DA-227-03]

July 18, 2003 BIR RULING [DA-227-03] Sec. 25 (C); BIR Ruling No. DA 246-02 Mr. Abraham Adduru c/o Oberthur Card Systems 27B Rufino Pacific Tower 6784 Ayala Avenue Makati City S i r : This refers to your faxed letters dated May 27, 2003 and May 9, 2003 jointly signed by Ronald Reyes and Jun S. Sanchez requesting for a ruling that the income tax rate applicable to all of you is fifteen percent (15%) of your gross income. It is represented that you, together with Ronald Reyes and Jim S. Sanchez, are currently employed at Oberthur Card Systems S.A. ("Oberthur") with regional office at 27B Rufino Pacific Tower, Ayala Avenue, Makati City; that Oberthur is a multinational company organized and existing under the laws of France licensed by the Securities and Exchange Commission under SEC Registration No. A200300003 dated January 23, 2003 to establish and operate a regional or area headquarters in the Philippines pursuant to Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987, as amended by Republic Act No. 8756 and its implementing rules and regulations; that the company, listed on the Euronext Stock Exchange (Code Euroclear 12413) since July 2000, is one of the leading providers of card-based solutions, software and applications including SIM and multi-application smart cards and services ranging from consulting to personalization; and that you, together with Ronald Reyes and Jim S. Sanchez, are employed as Technical Support Engineers with the following duties and responsibilities: provide local/regional technical support and project management (including project definition and project plans) for applications development and test card production phases assist sales team during customer meetings and attend trade shows where required both locally and overseas; installation and support of demonstrations where appropriate; must work closely with the following people: Managing Director, Business Development Manager, Central Marketing Support, Regional Support Team, Personalization Bureau, Paris Customer Services and Manufacturing facilities in France. In reply, please be informed that Section 2.57.1(D) of Revenue Regulations No. 2-98, as amended by Revenue Regulations No. 6-2001, and as further amended by Revenue Regulations No. 12-2001, now reads: cTDIaC "(D) Income Derived by Alien Individuals Employed by Regional or Area Headquarters and Regional Operating Headquarters of Multinational Companies . xxx xxx xxx The same tax treatment is applicable to Filipinos employed and occupying the same positions as those aliens employed by regional or area headquarters and regional operating headquarters of multinational companies, regardless of whether or not there is an alien executive occupying the same position, provided, that such Filipinos shall have the option to be taxed at either 15% of gross income or at the regular tax rate on their taxable income in accordance with the Tax Code of 1997 if the employer (Regional Operating Headquarters/Regional or Area Headquarters) is governed by Book III of E.O. 226 as amended by R.A. 8756. In case the Filipino opted to be taxed at the regular tax rate under Section 24 of the Tax Code of 1997, the provisions of Section 2.79(A) to (D) of Revenue Regulations 2-98 shall apply. xxx xxx xxx." Based on the foregoing, you, together with Ronald Reyes and Jim S. Sanchez have the option to be taxed at either 15% of your gross income or the graduated tax rates of 5%-32% in accordance with Section 24 of the Tax Code of 1997 as implemented by Revenue Regulations No. 2-98, as amended by Revenue Regulations No. 6-2001 and 12-2001. 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, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group