BIR Ruling [DA-679-06]

November 24, 2006 BIR RULING [DA-679-06] Sec. 23 (C); RMO 34-00 Seabreeze Crewing (Manila), Inc . Unit 307-B, Bonaventure Plaza Building Ortigas Avenue, Greenhills San Juan, Metro Manila Attention: Ms. Eleanor B. Baldo Corporate Secretary Gentlemen : This refers to your letter dated November 20, 2006 stating that Seabreeze Crewing (Manila), Inc. ("SCMI") is applying with the Philippine Overseas Employment Administration (POEA) for a license; that one of the requirements for the POEA licensing is for the officers-incorporators of the company to submit their individual Income Tax Return (ITR); that Eleanor B. Baldo is one of the incorporators of SCMI; that she has just arrived from the United States of America where she worked for the past two (2) years; that as a worker abroad, she has not filed an ITR here in the Philippines; that Angelo B. Tiu, on the other hand, is also an incorporator of SCMI; that he is currently a student and not gainfully employed, hence, has not filed any income tax return; and that in connection with the above POEA requirement, you are requesting a certification from this Office showing that Eleanor B. Baldo and Angelo B. Tiu are not required to file the ITR for the past two years. In reply, please be informed that Section 23(C) of the 1997 Tax Code, as amended, provides as follows: "(C) An 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 Philippines . . . . ." (Emphasis supplied). Corollary thereto, Section 22(E)(3) of the same Code provides that 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 shall be considered as a non-resident citizen. Consequently, his income derived purely from his employment abroad is exempt from income tax. DISaEA On the other hand, 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 and considering that for the last two (2) years Eleanor B. Baldo was deriving income purely from her employment abroad, she is, therefore, exempt from income tax during such period, and consequently, from filing the individual income tax return. On the other hand, in the case of Angelo B. Tiu, since he is only a student and not gainfully employed, he is not therefore required to file an income tax return. Accordingly, Eleanor B. Baldo and Angelo B. Tiu are exempted from complying with the requirement of POEA to submit an ITR. 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. HAEDIS Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service