BIR Ruling [DA-246-02]

December 18, 2002 BIR RULING [DA-246-02] 25 (C); 011-84 Pacis & Reyes 8/F, Chatham House 116 Valero Street (corner Herrera Street) Salcedo Village, Makati City Attention: Ms. Christine P. Base Gentlemen : This refers to your letter dated June 20, 2002 requesting on behalf of your client, Paragon Travel Limited (Paragon) and its officers, Riyaz Moorani, Maria Cecilia V. Cedo and Rameses G. Villanueva , for a ruling that the income tax rate applicable to the above officers is fifteen percent (15%) of their gross income in accordance with Section 25(C) of the Tax Code of 1997. It is represented that Paragon, a multinational corporation duly organized and operating under the laws of Hong Kong, was licensed by the Securities and Exchange Commission (SEC) to establish and operate a Regional Operating Headquarters (ROHQ) in the Philippines pursuant to Executive Order (E.O.) No. 226, otherwise known as the Omnibus Investments Code of 1987, as amended by Republic Act (R.A.) No. 8756 and its implementing rules and regulations; that Riyaz Moorani, an expatriate with a special non-immigrant visa issued under Art. 59, E.O. No. 226, occupies a managerial and highly technical position as Regional Vice President for Information Technology in the ROHQ of Paragon; that Maria Cecilia V. Cedo and Rameses G. Villanueva are employees of Paragon and occupy positions equal to the rank of Riyaz Moorani as Regional Vice President for Customer Service and Vice President for Finance of the ROHQ, respectively. 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: "(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. In case of the latter, the withholding rates under Sections 2.78 and 2.79 of Revenue Regulations No. 2-98 shall apply. xxx xxx xxx Based on the foregoing, the income payments to Riyaz Moorani would thus be subject to the preferential rate of 15% of gross income, pursuant to Revenue Regulations No. 2-98, as amended by Rev. Regs. No. 6-2001 and 12-2001. On the other hand, Maria Cecilia V. Cedo and Rameses G. Villanueva have the option to be taxed at either 15% of their gross income or the graduated tax rates of 5%32% in accordance with Section 24 of the Tax Code of 1997. ITAaHc 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