Salaries, Wages, Compensations, Remunerations or Emoluments Received by Non-Resident Aliens for Labor or Services Performed Outside the Philippines Not Subject to Tax

January 13, 1982 BIR RULING NO. 006-82 37-a 000-00 006-82 The Revenue Attache Philippine Embassy 11-24 Nampeidai Machi Shibuyako, Tokyo, Japan S i r : This refers to your letter dated December 28, 1981 inquiring whether or not the salaries received by Japanese nationals residing in Japan out of their employment in the offices of the Philippine Airlines, the Philippine National Bank and the branches of Philippine corporations in Japan are subject to withholding tax under Section 53 (b) (1) of the Tax Code, as amended. cd i In reply, please be informed that your query is answered in the negative. Under Section 53(b)(1) of the Tax Code, as amended, the salaries, wages, compensations, remunerations or other emoluments received by non-resident aliens not engaged in trade or business in the Philippines from sources within the Philippines are subject to 30% withholding tax. Under Section 37(a)(3) of the same Code, to be considered as Philippine source income, the salaries or compensations must be paid for labor or services performed in the Philippines. The aforesaid offices of Philippine corporations in Japan are not considered as extensions of Philippine territory as understood in international public law, in which case, salaries paid by them to Japanese nationals residing in Japan are not considered as income from Philippine sources. Moreover, pursuant to Article 15 of the RP-Japan Tax Treaty, salaries, wages and other similar remunerations derived by a resident of a contracting state in respect of an employee shall be taxable in that contracting state, unless the employment is exercised in the other contracting state, where such remunerations as derived therefrom may be taxed in that other contracting state. In other, words, the salaries earned by a resident of Japan for services rendered in the Philippines shall be taxed in the Philippines. Therefore, the salaries received by a Japanese national residing in Japan for services rendered in Japan, although paid by Philippine juridical enterprises, shall be taxed only in Japan and not in the Philippines. Very truly yours, RUBEN B. ANCHETA Acting Commissioner