Pepsi-Cola Products Philippines, Inc.

August 6, 2009 BIR RULING [DA-(C-169) 444-09] 22 (F), 23 (D); 24 (A) (1) (c); 42 (A); DA-192-2008 Pepsi-Cola Products Philippines, Inc. Km. 29 National Road, Tunasan Muntinlupa City Attention: Mr. Redentor R. Gabinete Tax Director Gentlemen : This refers to your letter dated January 5, 2009 requesting for a confirmation of opinion that the expatriate employee of Pepsi-Cola Products Philippines, Inc. (PCPPI), by the name of Mr. Partha Chakrabarti is considered to be a resident alien for Philippine income tax purposes. It appears that PCPPI is a corporation organized and existing under Philippine laws. It is engaged in the business of manufacturing, selling and distributing non-alcoholic beverages and among its products are Pepsi Cola, Mirinda, Mountain Dew, 7-Up, Gatorade, Tropicana and Propel. Its principal office is located at Km. 29, National Road, Tunasan, Muntinlupa City. Mr. Partha Chakrabarti is currently the Chief Financial Officer of PCPPI and has held such position since December 2006. By virtue of his position and responsibilities in the company, he is living or residing in the Philippines with his family and that his extended stay herein is necessary to accomplish the objectives of his job. He pays Philippine income tax on the basis of his salaries and benefits that he receives on account of his employment in the Philippines. He was issued an Alien Certificate of Registration (ACR) by the Bureau of Immigration on July 23, 2008 and is valid until July 23, 2009. HASDcC In reply, please be informed that under Sec. 22 (F) of the Tax Code of 1997, as amended, the term "resident alien" means an individual whose residence is within the Philippines and who is not a citizen thereof. In relation thereto, portion of Sec. 5 of Revenue Regulations No. 2 (Income Tax Regulations) provides as follows, viz. : "An alien actually present in the Philippines who is not a mere transient or sojourner is a resident of the Philippines for purposes of the income tax. Whether he is a transient or not is determined by his intentions with regard to the length and nature of his stay. A mere floating intention indefinite as to time, to return to another country is not sufficient to constitute him a transient. If he lives in the Philippines and has no definite intention as to his stay, he is a resident. One who comes to the Philippines for a definite purpose which in its nature may be promptly accomplished is a transient. But if his purpose is of such a nature that an extended stay may be necessary for its accomplishment, and to that end the alien makes his home temporarily in the Philippines, he becomes a resident, though it may be his intention at all times to return to his domicile abroad when the purpose for which he came has been consummated or abandoned." Based on the foregoing, it can be deduced that an alien (or one who is not a citizen of the Philippines) may be considered a resident of the Philippines for income tax purposes if: (1) he or she is not a mere transient or sojourner, (2) he or she has no definite intention as to his stay, or (3) his or her purpose is of such a nature that an extended stay may be necessary for its accomplishment, and to that end the alien makes his or her home temporarily in the Philippines. Thus, Mr. Chakrabarti may be properly considered as an alien resident of the Philippines for purposes of our income tax laws. Sec. 23 (D) of the Tax Code of 1997 provides that ''An alien individual, whether a resident or not of the Philippines, is taxable only on income derived from sources within the Philippines". cHSTEA Furthermore, Sec. 24 (A) (1) (c) of the same Code provides that an income tax is imposed on the taxable income defined in Sec. 31 of said Code, other than income subject to tax under Subsections (B), (C) and (D) of this Section, derived for each taxable year from all sources within the Philippines by an individual alien who is a resident of the Philippines. Accordingly, the compensation received by Mr. Chakrabarti for labor or personal services performed in the Philippines is treated as his gross income from sources within the Philippines under Sec. 42 (A) of the 1997 Tax Code which provides that: "SEC. 42. Income from Sources Within the Philippines. (A) Gross Income from Sources Within the Philippines. The following items of gross income shall be treated as gross income from sources within the Philippines: xxx xxx xxx (3) Services. Compensation for labor or personal services performed in the Philippines; xxx xxx xxx" Such being the case, Mr. Chakrabarti should include his wages or salaries directly in computing his individual income tax liabilities in the Philippines. In earning such wages or salaries, he renders personal services in the Philippines as an expatriate employee and thus, payment received in consideration thereof is gross income from sources within the Philippines. (BIR Ruling No. DA-192-2008 dated March 24, 2008) SEHTAC This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service