Taxability of Remuneration Paid to Local and Foreign Personnel of CMHS

February 24, 1984 BIR RULING NO. 043-84 090-a-4-000-00-043-84 Gentlemen : This is a clarification on B.I.R. Ruling No. 090-a-51-80-295-82 dated November 23, 1982, dispositive portion of which is quoted hereunder as follows: "pursuant to Section 90(a)(4) of the Tax Code, as amended, the term "wages" does not include remunerations paid for services by a citizen or resident of the Philippines for a foreign government or any international organization. Accordingly, since the CMHS is an agency of the United Nations High Commission for Refugees, remunerations paid by CMHS to its employees are not subject to the withholding tax on wages. Moreover, since the CMHS is fully funded by the UNHCR, remunerations paid to its employees are exempt from income tax, pursuant to Section 18(b) of the Convention on the Privileges and Immunities of the United Nations, which was adopted by the U.N. General Assembly on February 13, 1946. However, pursuant to Section 17 of the said convention, the operative act under which the tax-exemption shall be enjoyed is a certification to be submitted by the United Nations to our Ministry of Foreign Affairs. Unless such certification is secured and submitted, the said employees shall file their income tax returns and pay the income tax due from them. [Sec. 3(e), Revenue Regulations No. 6-82]" In connection thereto, please be informed that the tax exemption under the Convention does not cover all the officials and employees of CMHS, the implementing agency of the UNHCR. In order to enjoy tax exemption, the specialized agency, like the International Refugee Organization or the UNHCR should specify the categories of officials to which the exemption shall apply and shall communicate them to the Governments of all States parties to the Convention in respect of that agency and to the Secretary-General of the United Nations (Sec. 18). In other words, only the officials and employees of CMHS whose names are included in the list of officials and employees which shall from time to time be communicated and made known to the Governments of member-nations are exempt from the payment of income tax in respect of the salaries and emoluments received by them from the Organizations . Consequently, for tax-exemption purposes, the certification issued by Mr. Joseph D. Young, Programme Officer of the United Nations High Commissioner for Refugees (UNHCR, Philippine Branch) on 25 February 1983 and transmitted to this Office by 1st Indorsement dated April 13, 1983 of the Chief of Protocol for Privileges and Immunities, Ministry of Foreign Affairs is not the required list or communication alluded to in the said Convention. In fine, while the remuneration paid to the local and foreign personnel of CMHS who are not included in the aforesaid list are subject to Philippine income tax, the same is not subject to the withholding tax on wages because the services in this case are being performed by citizens or residents of the Philippines for an international organization (Sec. 90(a)(4), Tax Code). Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner