American Nationals Working Inside Military Bases

July 7, 1970 BIR RULING NO. 036-70 American nationals working inside military bases FACTS: Some Americans employed at the US Naval Base, Subic Bay, who were either born in the Philippines or were residents in this country prior to their employment imported tax-free vehicles and appliances for their personal use. Inasmuch as these Americans are not covered by the exemption provided for under Section 2 Art. XII of the US Philippine Bases Agreement, Mr. U. Firmacion, Revenue District Officer of Inspection District No. 17 is of the opinion that these Americans are not also covered by the exemption referred to in Sec. 3 of the same article of the Bases Agreement. (Please see attached extract copy of the US-Phil. Bases Agreement for ready reference.)" QUERY: Is the opinion of the Revenue District Officer that the Americans not covered by Secs. 1 and 2 of Art. XII of the US-Phil. Bases Agreement are not also covered by the exemption provided for in Sec. 3 of the same Article correct?" casia REPLY: Sections 1, 2, and 3 of Article XII of US-PHIL. Military Bases Agreement provides: Article Z11-Internal Revenue Tax Exemption 1. No member of the United States armed forces, except Filipino citizens, serving in the Philippines in connection with bases and residing in the Phil. by reason only of such service, or his dependents, shall be liable to pay income tax in the Philippines except in respect to income derived from Philippines sources. 2. No national of the United States serving in or employed in the Philippines in connection with construction, maintenance, operation or defense of the bases and residing in the Philippines by reason only of such employment, or his spouse and minor children and dependent parents or either spouse, shall be liable to pay income tax in the Philippines except in respect of income derived from the Phil. source or sources other than the United States sources. 3. No person referred to in paragraph 1 and 2 of this article shall be liable to pay to the Government or local authorities of the Philippines any poll or residence tax, or any import or export duty, or any other tax on personal property imported for his own use; provided that privately-owned vehicles shall be subject to payment of the following only: When certified as being used for military purposes by appropriate United States authorities, the normal license plate fee: otherwise, the normal license plate and registration fee." Pursuant to Section 3 of the above Articles of the US-PI Military Bases Agreement, the Tax exemption on personal property imported for personal use has reference only to American nationals who are exempt from income tax under Sections 1 and 2 of the said agreement because they are serving or are employed in U.S. bases and are residing in the Philippines by reason only of such service or employment. Americans presently working in the U.S. Bases in the Philippines who were either born in the Philippines or were residents of this country prior to their service or employment are not considered residing in the Philippines by reason only of such service or employment. (BIR Ruling No. 70-030, May 28, 1970) Consequently, they can not claim tax exemption under Section 3 of the above Article XII. In view thereof, the American nationals who were either born in the Philippines or were residents of this country prior to their service or employment in U.S. bases are subject to compensating tax on their importation of vehicles and appliances for their personal use, pursuant to Section 190, in relation to Sections 184, 185, 185-B and 186 all of the Tax Code, as amended by Republic Act No. 6110.