Salaries Paid by an International Organization, to Its Employees are Not Subject to the Withholding Tax

March 16, 1989 BIR RULING NO. 037-89 71 (a) 88-81 037-89 Gentlemen : This refers to your letter dated February 10, 1989 requesting in behalf of your client, Deutsche Gesellschaft fur Technische Zusammenarbeit (GTZ) Gmbh, confirmation of your opinion that the salaries it pays to its employees are not subject to withholding tax on wages, pursuant to Section 71(a)(4) of the Tax Code, on the ground that it is an international organization. cdtech It is represented that GTZ is owned by the German Federal Government; that it is a commercial enterprise with a development mission; that it is commissioned by the Government of the Federal Republic of Germany to undertake specialist technical cooperation with developing countries; that most of the activities of GTZ are carried out on behalf of the German Federal Government on a non-profit basis and are governed by international agreements between the Federal Government and the partner countries; that GTZ is carrying out 2,000 projects in more than 100 African, Asian and Latin American countries; that its work involves more than 3,000 staff members, currently, in 28 offices abroad; that GTZ maintains an office in the Philippines; and that it employs Filipinos in its Philippine office, the salaries of whom are paid in German Deutschmarks and deposited in a German Bank. In reply, please by informed that your opinion to the effect that the salaries being paid by your client, GTZ, an international organization, to its employees are not subject to the withholding tax on wages is hereby confirmed. Under Section 71(a) of the Tax Code, as amended, the term "wages" means all remuneration (other than fees paid to a public official) for services performed by an employee for his employer, including the cash value of all remuneration paid in any medium other than cash, except that such terms shall not include remuneration paid, among others for services by a citizen or resident of the Philippines for a foreign government or an international organization. However, said Filipino employees are required to file their income tax return in compliance with Section 44 of the Tax Code, as amended by Executive Order No. 273 [Sec. 3(f), Revenue Regulations No. 6-82]. Very truly yours, (SGD.) JOSE U. ONG Commissioner