BIR Ruling No. 048-65

May 18, 1965 BIR RULING NO. 048-65 3rd Indorsement Returned to the Regional Director, B.I.R. Regional District No. 6, Manila (South), the attached papers consisting of twenty-three (23) pages, bearing on the deficiency income tax case of Mr. Frank E. Maxwell, c/o Foster Wheeler Corporation, P. O. Box 167, Manila, for the year 1960, involving the amount of P650.80 exclusive of interest, with the following information: The records of this case show that Mr. Frank E. Maxwell is a British Citizen who was employed in the Foster Wheeler Corporation, of Limay, Bataan, from June 21, 1959 up to the time when he left the Philippines, which was on June 2, 1960. The deficiency assessment in question was the result of the disallowance by that Office of the optional standard deduction and personal exemption claimed by subject taxpayer in his 1960 income tax return. The disallowance was based on the theory that subject taxpayer is a nonresident alien in 1960 and therefore, not entitled to the optional standard deduction under Section 30(k) of the Tax Code. Subject taxpayer, through counsel protested against this deficiency assessment on the ground that Mr. Maxwell is a resident of the Philippines for income tax purposes. The issue in this case is whether or not Mr. Maxwell is a resident of the Philippines in 1960. A British Citizen coming to the Philippines on a temporary stay of six months or less than a year but exceeding six months, is considered a nonresident alien, taxable only on income from sources within the Philippines and not entitled to claim deductions and personal exemptions allowable to citizens or residents of the Philippines. However, as a nonresident alien individual, he is entitled to a personal exemption in an amount equal to the exemption allowed by the British Income Tax Law to citizens of the Philippines not residing in Great Britain, but not to exceed the amount fixed under our law as exemption for citizens or residents of the Philippines, pursuant to Section 23(e) of the National Internal Revenue Code (B.I.R. Ruling dated November 24, 1954). In this connection, it may be stated that, as a general rule, the status of a non-resident alien individual who comes to the Philippines for employment for a temporary period is that of a non-resident alien individual engaged in trade or business in the Philippines. Therefore, Mr. Maxwell, who is clearly a non-resident alien individual engaged in trade or business in this country is not entitled to the optional standard deduction but only to a personal exemption in an amount equal to the exemption allowed by the British Income Tax Law of which he is a citizen, to citizens of the Philippines not residing in Great Britain, but not to exceed the amount fixed in Section 23(a) and (b) of the Tax Code as exemption for citizens or residents of the Philippines. (Subsection (e), Ibid.) casia Accordingly, unless it can be shown that there exists a reciprocity as regards personal exemption between the British law and Philippine law, the deficiency assessment against Mr. Maxwell should be given due course. (SGD.) BENJAMIN N. TABIOS Acting Commissioner of Internal Revenue