BIR Ruling [DA-266-98]

June 24, 1998 BIR RULING [DA-266-98] Mr. Jaime Q. Concepcion Revenue District Officer RDO No. 33, Intramuros Metro Manila S i r : This refers to your letter dated February 4, 1997 requesting for a ruling as to the tax status of Mr. Loreto C. Galeno in 1992 and 1994, given the following facts, viz: "1. Mr. Galeno is a Filipino seaman employed by Eastern Shipping Lines, Inc., a domestic corporation which owns and operates vessels used in international trade; "2. In the course of his employment from said employer, Mr. Galeno received compensation in the form of salaries as a crew of one of the vessels and files a 1701-C return; "3. Mr. Galeno further claims that in the years 1992 and 1994, he was on board the vessel which sailed outside the Philippines; "4. The vessel so mentioned above is of Philippine registry, carrying a Filipino Flag; "5. Eastern Shipping Lines, Inc. paid Mr. Galeno his salary in Pesos and was subjected to withholding tax based on the regular computation as a resident citizen." It appears that Mr. Galeno is claiming a refund of the income tax withheld from his compensation during the above-stated years as he believes that the same is in excess of the tax due from him as a non-resident citizen. In reply, please be informed that pursuant to then Section 20 (e) (1)of the Tax Code, as amended, a "non-resident citizen" means one who establishes to the satisfaction of the Commissioner the fact of his physical presence abroad with a definite intention to reside therein. Moreover, a citizen leaving the Philippines during the taxable year to reside abroad, either as an immigrant or for employment on a more or less permanent basis and contract workers whose contract of employment are renewed from time to time within or during the taxable year under such circumstances as to require them to be physically present abroad most of the time during the taxable year, shall be considered as a non-resident for such taxable year with respect to the income he derived from foreign sources from the date he actually departed from the Philippines. (Section 20 (e)(2), Tax Code) cdll Accordingly, Mr. Galeno is considered a resident citizen subject to tax under then Section 21 (a) of the Tax Code, as amended by Executive Order No. 37, since his salaries for the taxable years 1992 and 1994 were not derived from foreign sources but were paid in this country and in Philippine currency by Eastern Shipping Lines, Inc., a domestic corporation whose vessels are of Philippine registry. The income tax withheld from his compensation in 1992 and 1994 being correct, Mr. Galeno is not entitled to claim a refund thereof. However, for the year 1998 Mr. Galeno shall be treated as an overseas contract worker and as such, is taxable only on income from sources within the Philippines, pursuant to Section 23 (C) of the Tax Code of 1997. This ruling applies to all Filipino crewmen similarly situated as Mr. Loreto C. Galeno. llcd Very truly yours, (SGD.) LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue