Maestro Ruggero Barbieri, Engaged by the Cultural Center of the Philippines as Deputy Music Director and Principal Guest Conductor of the Philippine Philharmonic Orchestra, Considered as a Resident Alien for Income Tax Purposes

July 10, 1997 BIR RULING NO. 076-97 21 (f) 000-00 076-97 Cultural Center of the Philippines CCP Complex, Roxas Boulevard Pasay City Attention: Ms . Myrna A . Lopez, M . D . Executive Director/Manager Philippine Philharmonic Orchestra Gentlemen : This refers to your undated fax letter stating that the Cultural Center of the Philippines (CCP) hired Maestro Ruggero Barbieri of Bergamo, Italy, as Deputy Music Director and Principal Guest Conductor of the Philippine Philharmonic Orchestra by virtue of a Letter Agreement dated September 1, 1996; that his appointment commenced on September 1, 1996 and ends on December 31, 2000; that he has agreed to perform the following responsibilities, to wit: "1. Provides for the artistic direction of the orchestra; "2. Plans and submits orchestra training and developmental program to management for study and implementation; "3. Plans and implements the future Season Concerts of the orchestra; "4. Decides the general programming of all PPO concerts; "5. As the need arises, schedules and/or conducts daily rehearsals of the orchestra; puts a program for the training of assistant conductors and assign performances to them; "6. Performs such other related tasks for the upliftment of the PPO and the Center's functions;" that in consideration of the forgoing functions of Maestro Ruggero Barbieri, the CCP agreed to pay a monthly professional fee of Six Thousand Five Hundred U.S. Dollars ($6,500.00) and other applicable allowances attendant to the former's contractual appointment with the Center plus living accommodation including board and lodging; that in the supplemental contract with the CCP, as represented by Mr. Baltazar N. Endriga, the following provisions have been agreed upon, to wit: "1. Vacation Leave with Pay 25 days inclusive of 4 days for travel during Christmas season 18 days inclusive of 4 days for travel during Easter "2. Vacation Leave without Pay 45 days during the months of July-August "3. While PPO is priority during the PPO Concert Seasons, Mr. Barbieri has the option to accept conducting concert abroad during this time should there be a need, since this will allow him to establish connection with other orchestras/conductors/diplomats/cultural offices/agents performing companies which he considers a "fundamental element for the image of the PPO" "4. Invitational performances and Outreach performances in the Philippines are considered part of Mr. Barbieri's functions as stated in #6 of the Letter-Agreement "perform such other related tasks for the upliftment of the PPO and the Center's function". Should the orchestra be invited for performances abroad, Mr. Barbieri's professional fee shall be undertaken by the negotiating party." Based on the foregoing, you now request for a ruling on whether Maestro Ruggero Barbieri can be considered as a non-resident or a resident alien for income tax purposes and tax he has to pay. In reply, please be informed that Article 14 of the RP-Italy Tax Treaty provides as follows: "Article 14 Personal Services "1. Subject to the provisions of Article 15, 17 and 18, salaries, wages and other similar remuneration or income for personal (including professional) services derived by a resident of a Contracting State, shall be taxable only in that State unless the services are performed in the other Contracting State. If the services are so performed, such remuneration or income as is derived therefrom may be taxed in that other State. "2. . . . "3. The term "professional services" includes, especially, independent scientific, literary, artistic, educational or teaching activities as well as independent activities of physicians, lawyers, engineers, architects, dentists and accountants. xxx xxx xxx Such being the case, Maestro Ruggero Barbieri, who has been engaged by the Cultural Center of the Philippines as Deputy Music Director and Principal Guest Conductor of the Philippine Philharmonic Orchestra from September 1, 1996 to December 31, 2000, shall be considered as a resident alien for income tax purposes. As a resident alien, who pursues his profession in the field of arts, he shall be subject to tax under Section 21(f) of the Tax Code, as amended, on his taxable income as determined in Section 27 also of the Tax Code, as amended. Stated hereunder are the pertinent provisions of the Tax Code, to guide Mr. Barbieri in the computation of his come tax liability: "SEC. 21. Tax on citizens or residents . xxx xxx xxx "(f) Simplified Net Income Tax for the Self-Employed and for Professionals Engaged in the Practice of Profession. A tax is hereby imposed upon the taxable net income as determined in Section 27 received during the taxable year from all sources, other than income covered by paragraphs (b), (c), (d) and (e) of this section by every individual whether a citizen of the Philippines or an alien residing in the Philippines who is self-employed or practices his profession herein determined in accordance with the following schedule: Not over P10,000 3% Over P10,000 but not over P30,000 P300 + 9% of excess over P10,000 Over P30,000 but not over P120,000 P2,100 + 15% of excess over P30,000 Over P120,000 but not over P350,000 P15,600 + 20% of excess over P120,000 Over P350,000 P61,600 + 30% of excess over P350,000 Furthermore, the deductions from gross income of self-employed and professionals are those provided for under Section 29 of the Tax Code, as amended, namely: "SEC. 29. Deductions from gross income . xxx xxx xxx "(a) Raw materials, supplies and direct labor; "(b) Salaries of employees directly engaged in activities in the course of or pursuant to the business or practice of profession; "(c) Telecommunications, electricity, fuel, light and water; "(d) Business rentals; "(e) Depreciation; "(f) Contributions made to the Government and accredited relief organizations for the rehabilitation of calamity stricken areas declared by the President; and "(g) Interest paid or accrued within a taxable year on loans contracted from accredited financial institutions which must be proven to have been incurred in connection with the conduct of a taxpayer's profession, trade or business. "For individuals whose cost of goods sold and direct costs are difficult to determine, a maximum of forty percent (40%) of their gross receipts shall be allowed as deductions to answer for business or professional expenses as the case may be." After deducting the applicable items enumerated in the preceding allowable deductions, the applicable personal exemptions shall likewise be deducted, as follows: "Section 29. Deductions from gross income . xxx xxx xxx "(1) Personal exemptions allowable to individuals. (1) Basic personal exemption. For the purpose of determining the tax provided in Section 21(a) of this Title, there shall be allowed a basic personal exemption as follows: For single individual or married individual judicially decreed as legally separated with no qualified dependents P9,000.00 For head of a family P12,000.00 For each married individual P18,000.00 Provided , That in case one of the spouses is deriving taxable income, only said spouse shall be allowed to avail of the aforesaid basic personal exemption for married individual. "For purposes of this paragraph, the term "Head of Family" means an unmarried or legally separated man or woman with one or both parents, or with one or more brothers and sisters, or with one or more legitimate, recognized natural or legally adopted children living with and dependent upon him for their chief support, where such brothers or sisters or children are not more than twenty-one (21) years of age, unmarried and not gainfully employed or where such children, brothers or sisters, regardless of age are incapable of self-support because of mental or physical defect. "(2) Additional exemption "(A) Taxpayers with dependents. A married individual or a head of a family shall be allowed an additional exemption of five thousand pesos (P5,000.00) for each dependent: Provided, That the total number of dependents for which additional exemptions may be claimed shall not exceed four dependents; Provided, further , That the additional exemption for dependents shall be claimed by only one of the spouses in the case of married individuals. "In case of legally separated spouses, additional exemptions may be claimed only by the spouse who was awarded custody of the child or children: Provided, That the total amount of additional exemptions that may be claimed by both shall not exceed the maximum additional exemptions herein allowed. "For purposes of this paragraph, a dependent means a legitimate, recognized natural or legally adopted child chiefly dependent upon and living with the taxpayer if such dependent is not more than twenty-one (21) years of age, unmarried and not gainfully employed or if such dependent, regardless of age, is incapable of self-support because of mental or physical defect. xxx xxx xxx" After deducting the applicable basic personal exemption and additional exemption, the resulting amount shall be the taxable income, which shall be the tax base to which the aforementioned rates shall be applied in computing the tax due. For an easier understanding of the aforementioned provisions, please take note of the following computation: Gross Income from Business/Profession P xxx (less) Deductions from Gross Income (Section 29, Tax Code, as amended) xxx Net Income from Business/Profession P xxx (less) Personal Exemptions (Basic Personal & Additional) (Section 29(1) xxx Net Taxable Income P xxx ==== Please be guided accordingly. aisadc Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue