Applicability of 15% Income Tax Rate to Expatriate Resident Manager

January 18, 1999 BIR RULING NO. 007-99 25 (C)-000-00-007-99 Santos Tardecilla Verdolaga & Co. Suite 505-C ITC Building 337 Gil Puyat Avenue Makati City Attention: Mr . Virgilio R . Santos Partner Gentlemen : This refers to your letter dated February 9, 1998 stating that Iwatani International Corporation (ITC), a corporation formed and organized under the laws of Japan, was registered with the Securities and Exchange Commission (SEC) as a Philippine Representative Office, per SEC Registration No. A-1997-10897 dated July 4, 1997; that as a representative office in the Philippines, the corporation is authorized to gather information, disseminate information on the company and its products, liaise with customers and is not authorized to generate income within the Philippines. Based on the foregoing representations and documents submitted, you are now requesting for a ruling confirming your opinion that the income tax rate applicable to the expatriate resident manager of the said representative office is fifteen percent (15%) in accordance with Section 25(C) of the Tax Code of 1997. In reply, please be informed that under Section 25(C) of the Tax Code of 1997, there shall be levied, collected and paid for each taxable year upon the gross income received by every alien individual employed by regional or area headquarters and regional operating headquarters established in the Philippines by multinational companies as salaries, wages, annuities, compensation, remuneration and other emoluments, such as honoraria and allowances, from such regional or area headquarters and regional operating headquarters, a tax equal to fifteen percent (15%) of such gross income: Provided, however, That the same tax treatment shall apply to Filipinos employed and occupying the same position as those of aliens employed by these multinational companies. For purposes of Chapter III of the Tax Code of 1997, the term "multinational company" means a foreign firm or entity engaged in international trade with affiliates or subsidiaries or branch offices in the Asia-Pacific Region and other foreign markets. Such being the case, this Office is hereby confirming your opinion that the income tax rate applicable to the expatriate resident manager being a representative officer in the Philippines is fifteen percent (15%) in accordance with Section 25(C) of the Tax Code of 1997. Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue