BIR Ruling [DA-324-03]

September 30, 2003 BIR RULING [DA-324-03] 23 (B); DA 554-99 Mr. Allan Quijalvo 416 EMMA Street Marick Subdivision Cainta, Rizal S i r : This refers to your letter which was received by this Office on January 27, 2003 requesting for a ruling as to whether non-resident citizens are exempt from the payment of income tax, and consequently from withholding tax, on income derived from sources outside the Philippines, pursuant to Section 23(B) in relation to Section 22(E)(2) of the Tax Code of 1997. It is represented that you are a senior engineer of ETSI Technologies, Inc., a Siemens AG Joint Venture Company, assigned in its Information Technology Foreign Services since August of 2000; that you were assigned in Munich, Germany from August 22, 2000 to December 31, 2001 and from January 5, 2002 up to the present in Tripoli, Libya; and that ETSI Technologies, Inc. deducted from your salary an amount representing your income tax in the amount of P133,908.49. In reply thereto, please be informed that pursuant to Section 22(E) of the Tax Code of 1997, as implemented by Revenue Regulations No. 9-99 defines the term non-resident citizen as: (1) A citizen of the Philippines who establishes to the satisfaction of the Commissioner the fact of his physical presence abroad with a definite intention to reside therein; (2) A citizen of the Philippines who leaves the Philippines during the taxable year to reside abroad, either as an immigrant or for employment on a permanent basis; (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. (4) . . . Corollarily, Section 23(B) of the Tax Code of 1997 provides that a non-resident citizen is taxable only on income derived from sources within the Philippines. Moreover, in BIR Ruling No. DA554-99 dated September 27, 1999, this Office ruled that ". . . we accordingly confirm that pursuant to Section 23(B) in relation to Sections 22(E)(3) & (E)(4) and 42(A)(3) and 42(C)(3) of the Tax Code of 1997, Mr. Cabugao was a nonresident citizen from January 1, 1998 to June 30, 1999, and therefore, he is not subject to income tax on his compensation income derived during his assignment as such Regional Audit Manager for Asia-Pacific Region in Bangkok, Thailand by Caltex Corporation for the said period January 1, 1998 to June 30, 1999, the date of his arrival in the Philippines. Consequently, no withholding tax should have been collected by CPI on the said compensation income during the period covering January 1, 1998 to June 30. 1999." IN VIEW OF THE FOREGOING, this Office holds that your income derived for services rendered in Munich, Germany and Tripoli, Libya for the respective years of 2000-2002 shall be exempt from income tax and consequently from withholding tax. cCHITA 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 null and void. Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group