BIR Ruling [DA-262-03]

August 12, 2003 BIR RULING [DA-262-03] Secs. 22 & 23; BIR Ruling No. 33-00 Mr. Edgardo T. Velasco Director, Development & International Markets Universal Robina Corporation 110 E. Rodriguez, Jr. Avenue Bagumbayan, Quezon City S i r : This refers to your letters dated February 22, 2001 and October 22, 2001 requesting for a ruling on whether you are considered as a non-resident taxpayer and therefore, exempt from income tax. You stated that you are the Director of Development and International Markets for the company; that you oversee the foreign operations of the company, including of late the setting up of a subsidiary in Indonesia; that your responsibility requires you to be physically out of the country for more than 183 days a year; and that you are based in the Philippines and receive your salary here, even though you work mostly overseas, guiding and monitoring the foreign operations of the company. In reply, please be informed that Section 23(B) of the Tax Code of 1997, which took effect on January 1, 1998, provides as follows: "(B) A nonresident citizen is taxable only on income derived from sources within the Philippines . . ." Corollary thereto, Section 22(E)(3) of the same Code 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." Moreover, Section 42(C)(3) of the 1997 Tax Code states "(C) Gross Income From Sources Without the Philippines. The following items of gross income shall be treated as income from sources without the Philippines: (1) . . . (2) . . . (3) Compensation for labor or personal services performed without the Philippines; . . ." Thus, for purposes of exemption from income tax, a citizen must be deriving foreign-sourced income for being a non-resident citizen under Section 23(C) of the Tax Code of 1997 or for being an overseas contract worker (OCW) under Section 23(B) of the same Code. You may be considered a non-resident citizen since your services are rendered abroad for more than 183 days and are 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, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group