Tax Exemption Privileges of UN Personnel Residing in the Philippines

July 9, 1999 BIR RULING NO. 101-99 24 (B)-000-00-101-99 Philippine National Bank PNB Financial Center Roxas Boulevard Metro Manila Attention: Ms . Dalia B . Elazegui Branch Manager Gentlemen : This refers to your letter dated December 12, 1997 requesting for advice on the tax exemption privileges extended to United Nations personnel residing in the Philippines and as to whether or not said tax exemption extends to the interests on deposits of said UN personnel. In reply, please be informed that under Section (b), Article V of the Convention on the Privileges and Immunities of the United Nations, as adopted by the General Assembly on February 13, 1946, pertinent provision of which is quoted as follows, viz: "Article V "Officials "SEC. 18. Officials of the United Nations shall: "xxx xxx xxx; "(b) Be exempt from taxation on the salaries and emoluments paid to them by the United Nations; "xxx xxx xxx." Likewise, Section 18 and 19(b) of Article VI of the Convention on the Privileges and Immunities of the Specialized Agencies of the United Nations provides that "Article VI "Officials "SEC. 18. Each specialized agency will specify the categories of officials to which the provisions of this article and of article VIII shall apply. It shall communicate them to the Governments of all States parties to this Convention in respect of that agency and to the Secretary-General of the United Nations. The names of the officials included in these categories shall from time to time be made known to the above-mentioned Governments. "SEC. 19. Officials of the specialized agencies shall: "xxx xxx xxx; "(b) Enjoy the same exemptions from the taxation in respect of the salaries and emoluments paid to them by the specialized agencies and on the same conditions as are enjoyed by officials of the United Nations; "xxx xxx xxx." Thus, notwithstanding the foregoing provisions on the privileges of officials of the United Nations, interest income from bank deposits of the personnel of the United Nations residing in the Philippines, whether resident citizen or resident alien, is subject to the 20% final withholding tax on interest income on bank deposits pursuant to Section 24(B)(1) of the Tax Code of 1997 considering that the interest income is derived from passive investments of the said United Nations personnel and not from the salaries or emolument from the United Nations. Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue