Coverage of the Terms "Non-Resident Citizens" and "Overseas Contract Workers" Referred to in No. 5 of RMC No. 1-98

June 19, 1998 BIR RULING NO. 094-98 22 (E) 23 (B)-000-00-094-98 Ms. Estrella A. Berenguel Consul General Philippine Consulate General Room 605, 6th Floor, United Centre 95 Queensway, Hongkong M a d a m : This refers to your letter dated February 11, 1998 requesting a ruling on the coverage of the term "non-resident citizens" and "overseas contract workers" referred to in No. 5 of Revenue Memorandum Circular No. 1-98 dated January 2, 1998 specifically the following groups of Filipinos working and residing in Hongkong: "1. Professionals and entertainers who have come to work in Hongkong, a number without passing thru POEA, but are considered residents on account of their employment in registered Hongkong companies, and therefore their residency is co-terminus with their employment; LLjur "2. Professionals and entertainers who have come to work in Hongkong for more than 7 years and had been granted permanent residency in Hongkong pursuant to the Hongkong Immigration Ordinance on the right of abode." In reply thereto, please be informed that pursuant to Section 22 (E) of the Tax Code of 1997 (then Section 20(e) of the Tax Code of 1977, as amended), the term "non-resident citizen" means: "(1) A citizen of the Philippines who establishes to the satisfaction of the Commissioner the fact of his physical presence abroad with a definite intention to reside therein; "(2) A citizen of the Philippines who leaves the Philippines during the taxable year to reside abroad, either as an immigrant or for employment on a permanent basis; "(3) A citizen of the Philippines who works and derives income from abroad and whose employment thereat requires him to be physically present abroad most of the time during the taxable year; "(4) . . . "(5) . . . Moreover, under Section 23 (B) of the Tax Code of 1997, a non - resident citizen is taxable only on income derived from sources within the Philippines. Thus, income earned by non-resident citizens abroad are now exempt from income tax. Such being the case, professionals and entertainers who have gone to work in Hongkong, and are considered residents of Hongkong on account of their employment in registered Hongkong companies, with their residency being co-terminus with their employment, as well as professionals and entertainers who have gone to work in Hongkong for more than seven (7) years and had been granted permanent residency in Hongkong pursuant to the Hongkong Immigration Ordinance on the right of abode are considered as non-resident citizens pursuant to Section 22 (E)(2) of the Tax Code of 1997. Accordingly, the income of said non-resident citizen derived from Hongkong for taxable year 1998 is exempt from the payment of income tax under Section 23 (B) of the Tax Code of 1997. However, the income of said non-resident citizen derived for taxable year 1997 is still subject to income tax pursuant to Section 21 (b) of the Tax Code of 1977, as amended. Very truly yours, (SGD.) LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue