Tax Consequence of the Amendment/Change Temporary Visitor's Visa to that of a Special Retiree Residents Visa

February 3, 1989 BIR RULING NO. 012-89 21 (a) 000-00 012-89 M a d a m : This refers to your letter dated December 19, 1988 stating that your client Mr. Gerhard Gjuvsland, a Norwegian citizen, is 62 years old; that he came to the Philippines in November 1988 as a representative of Westfal-Larsen & Co. A/S to look into the possibility of putting up a representative office in Manila, which will be a communication and coordination office; that being eligible to become a member of the Philippine Retirement Program of the Philippine Retirement Authority he applied and was admitted to the Philippine Retirement Program of the Philippine Retirement Authority; that on December 8, 1988, his temporary visitor's visa was amended/changed to a Special Retiree Residents visa; that you secured in his behalf Tax Account No. G2121-H2226-A-6; that per Philippine Retirement Program, he is exempt from taxes on any pensions received by him; that Westfal/Larsen & Co. A/S has applied with the Securities and Exchange Commission permission to do business in the Philippines by putting up a representative office here in Manila; and that Mr. Gjuvsland was appointed as representative/general manager of the said office for which he will receive a monthly salary from Westfal-Larsen's head office in Norway. cdtech Based on the foregoing representations, you now request in effect a ruling as to whether or not your said client is liable to pay any tax in the Philippines, and in the affirmative, the kind of tax he should pay; and whether he is still liable to pay taxes in Norway if he is already paying the same taxes in the Philippines. In reply, please be informed that as a consequence of the amendment/change of Mr. Gerhard Gjuvsland's temporary visitor's visa to that of a Special Retiree Residents visa as a result of his admission to the Philippine Retirement Program of the Philippine Retirement Authority created under and by virtue of Executive Order No. 1037, one of the basic objectives of which is the development and promotion of the Philippines as a retirement haven for foreign nationals, his status for Philippine tax purposes was converted to that of a resident alien subject to Philippine income tax under Section 21(a) of the Tax Code, as amended. Accordingly, your said client is liable to pay Philippine income tax on his taxable compensation, business and other income as defined in Section 28 of the Tax Code, other than the income subject to tax under paragraphs (c), (d) and (e) of Section 81 of the said Code received during each taxable year from all sources. However, social security benefits, retirement, gratuities, pensions and other similar benefits received by resident or non-resident citizen of the Philippines or aliens who come to reside permanently in the Philippines from foreign government agencies and other institutions, private or public are not subject to income tax. (Sec. 28 (b) (7) (c), Tax Code, as amended) Moreover, it is suggested that, your query on whether your said client is still liable to pay taxes in Norway if he is already paying the same taxes in the Philippines, be referred to the tax authority of Norway since they are in a better position to answer the same. However, under Section 29(c)(3)(3) of the Tax Code, as amended, if the taxpayer signifies in his return his desire to have the benefits of paragraph 3 of said Section 29(c) of the Tax Code, the tax imposed by Title II of the same Code shall be credited with, in case of an alien residents of the Philippines, the amount of any such taxes paid or accrued during the taxable year to any foreign country, if the foreign country of which such alien resident is a citizen or subject, in imposing such taxes allows a similar credit to citizens of the Philippines residing in such country. Very truly yours, (SGD.) JOSE U. ONG Commissioner