Physical Presence Abroad for the Taxable Year Not Deemed Interrupted by Travels to the Philippines

March 15, 1974 BIR RULING NO. 004-74 Physical presence abroad for the taxable year not deemed interrupted by reason of travels to the Philippines . This refers to your letter dated February 8, 1974 requesting a ruling on a query stated as follows: "I was employed at the Italian Hospital in New York City, for continuously one (1) year and six (6) months from January 1972 to June 1973. The first year of my gross income was paid under the tax privilege granted to non-resident citizens working abroad. Having returned last July 1973, can I still qualify as non-resident citizen in filing my Income Tax Return for the remaining six (6) months of my income from January 1973 to June 1973, in order that I can be accorded the same privilege?" In reply thereto, I have the honor to inform you that under Section 21 of the Tax Code as amended by Presidential Decrees Nos. 69 and 323, a non-resident citizen is "one who establishes to the satisfaction of the Commissioner the fact of his physical presence abroad for an uninterrupted period which includes an entire taxable year." The phrase "uninterrupted period" should not be interpreted literally as to negate the continuity of residence abroad. If the reason for the physical presence abroad is established such as employment on a more or less regular tenure, such physical presence abroad for the taxable year is not deemed interrupted by reason of visits or travels to the Philippines, no matter how often made, as to negate the citizen's status as a non-resident citizen. ( Sec. 2, Rev. Regs. No. 9-73 dated November 26, 1973 ). Consequently, for the taxable year 1973, you are not considered a non-resident citizen in the absence of any proof that your employment abroad is on a more or less regular tenure and that your reason for returning to the Philippines during the taxable year 1973 was for a visit or travel to the country with legal obligation to go back to your employment abroad. Moreover, the rule is that income tax shall be computed on the basis of the taxpayer's annual accounting period. The accounting period of an individual taxpayer, e.g., non-resident Filipino citizen, is the calendar year (Sec. 38, N.I.R.C.) or a period beginning January 1 and ending December 31 of every year ( Sec. 84, N.I.R.C. ). Thus, for Philippine income tax purposes, the term "entire taxable year" found in the last proviso of Section 21 of the Tax Code as amended by Presidential Decree No. 69 means that actual residence or physical presence abroad of a Filipino citizen must be for an uninterrupted period starting January 1 up to December 31; and that the graduated rate of tax ranging from 1% to 3% shall be computed on the adjusted gross income earned or received by such non-resident citizen from sources outside the Philippines beginning January 1 to December 31 of each year. cdt In view of all the foregoing, this Office is of the opinion as it hereby holds that you and your husband should file your consolidated 1973 income tax return on or before March 15, 1974 and compute your income tax due thereon at the progressive rates imposed by Section 21 of the Tax Code as amended, ranging from 3% upon the amount by which the taxable net income does not exceed P2,000 and rising gradually to 70% upon the amount by which the taxable net income exceeds P500,000.00.