Deductibility of Accounting Fees and Postages Incurred by a Non-Resident Alien Individual Not Engaged in Trade or Business Within the Philippines

February 8, 1960 BIR RULING NO. 087-60 2nd Indorsement Returned to the Regional Director, Regional District No. 3, Manila, the herein papers bearing on the income tax case of Mrs. M. E. Casswell for the year 1954. cdi It appears on the record that the only issue is whether or not the expenses (accounting fees and postages) incurred by a non-resident alien individual not engaged in trade or business within the Philippines or not having an office or place of business therein are deductible from her gross income. The counsel of Mrs. Casswell contended that the disallowance of the accounting fees and postage expenses incurred by the subject taxpayer in 1954 is contrary to the provisions of Section 30(i) of the Tax Code which provides as follows: "(i) Conditions under which a non-resident alien individual may receive benefit of deductions . A non-resident alien individual shall receive the benefit of deductions provided for in this section only by filing or causing to be filed with the Collector of Internal Revenue a true and accurate return of his total income, received from all sources, corporate or otherwise, in the Philippines, in the manner prescribed by this Code; and in case of his failure to file such return the Collector of Internal Revenue shall collect the tax on such income." Apparently, taxpayer's counsel is claiming deduction under the provisions of section 30(a)(1) and (2) of the Tax Code. Ordinary and necessary expenses paid or incurred by nonresident alien individuals in the Philippines are allowed as deduction, however, only if paid or incurred in carrying on any business or trade within the Philippines. Since Mrs. M.E. Casswell was not engaged in trade or business in the Philippines in 1954, the expenses paid or incurred in said year, such as the accounting fees and postage expenses, must be disallowed as deductions from her gross income, that they were spent in earning the income. aisadc He is, therefore, advised to take action accordingly. MELECIO R. DOMINGO Commissioner of Internal Revenue