BIR Ruling [DA-500-06]

August 15, 2006 BIR RULING [DA-500-06] Sec. 23 (C); RMO 34-00 Covenant Extrahand Inc. Suite 408 P&J Building Pasig Boulevard cor. E. Rodriguez Avenue Pasig City Attention: Ms. Minerva Bibit Admin. Assistant Gentlemen : This refers to your letter dated August 1, 2006 stating that Covenant Extrahand Inc. ("Covenant") is applying with the Philippine Overseas Employment Administration (POEA) for a license; that one of the requirements in the POEA licensing is for the officers-incorporators of the company to submit their individual ITRs; that three (3) of the incorporators/officers of Covenant are Overseas Contract Workers (OCW), namely: 1. Alfredo Lumba 2. Rechie Yap; and 3. Harry Sanchez that as an OCW, they are exempt from the payment of income tax and filing of their individual Income Tax Return (ITR); and that in connection with the above POEA requirement, you are requesting a certification from this Office showing that they are not required to file the ITR. In support of your request, you are submitting the passports and proof of overseas employment of the above-mentioned individuals ( i.e ., Contract of Employment). In reply, please be informed that "(a)n individual citizen of the Philippines who is working and deriving income from abroad as an overseas contract worker is taxable only on income from sources within the Philippines: Provided, That a seaman who is a citizen of the Philippines and who receives compensation for services rendered abroad as a member of the complement of a vessel engaged exclusively in international trade shall be treated as an overseas contract worker." [Section 23(C), Tax Code of 1997]. Under Revenue Memorandum Order (RMO) No. 34-00, an individual who is exempt from income tax shall not be required to file an income tax return but may be required to file an information return pursuant to the rules and regulations prescribed by the Secretary of Finance. In view thereof, an OCW, who is deriving income purely from his employment abroad or from his employment as a member of the complement of a vessel engaged exclusively in international trade, is exempt from income tax. Consequently, such OCW is not required to file an ITR. However, an OCW is required to file a duly accomplished BIR Form No. 1703 covering income derived during the taxable year from sources outside the Philippines, pursuant to Revenue Regulations (RR) No. 9-99, in triplicate, with the Foreign Posts or the Revenue District Office having jurisdiction over the place of residence of the taxpayer, on or before April 15 of each year. However, those without legal address in the Philippines may opt to file directly with the Revenue District Office (RDO) No. 51, Pasay City. CHDAaS Such being the case, if Alfredo Lumba, Rechie Yap and Harry Sanchez derived income purely from their employment abroad, they are therefore exempt from the payment of income tax and consequently, from filing their individual ITR. Thus, they are exempted from complying with the requirement of POEA to submit an ITR. EIDTAa 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, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service