Whether a Non-Resident Alien is Entitled to the Preferential Tax Treaty Rate on Compensation Income of US$21,424.08 Inclusive of Housing Allowance

July 24, 1995 BIR RULING NO. 111-95 22 (A) (1) 000-00 111-95 28 (B) (6) Mr. Richard C. Dow SGV Building II 6758 Ayala Avenue Makati City S i r : This refers to your letter dated February 22, 1995, requesting confirmation of your opinion that you are entitled to the preferential tax treaty rate on your compensation income of US$21,424.08 inclusive of housing allowance for the month of November 1994 in view of your status as a non-resident alien for the year 1994. LLjur It is represented that you have worked initially as consultant from September 24 to 30 and from October 11 to 14, 1994 and returned on November 1, 1994 to be the Senior Regional Representative of the US-Based Bechtel Overseas Corporation; that during the month of December, you traveled to Singapore on business and stayed there for your days i.e., from December 10 to 13, 1994; and that the total number of days you have stayed in the Philippines in 1994 is 68 days . In reply, please be informed that pursuant to par. 1, 2(a), Article 16 of the RP-US Tax treaty stating "Article 16 "(1) Except as provided in Article 20 (Governmental Functions), wages, salaries, and similar remuneration derived by an individual who is a resident of one of the Contracting States from labor or personal services performed as an employee, including income from services performed by an officer of a corporation, may be taxed by that Contracting State. Except as provided by paragraphs (2) and (3) and in Articles 20 (Governmental Functions), 21 (Teachers), and 22 (Students and Trainees), such remuneration derived from sources within the other Contracting State may also be taxed by that other contracting State. "(2) Remunerations described in par. (1) derived by an individual who is a resident of one of the Contracting States shall be exempt from tax by the other Contracting State if "(a) He is present in that other Contracting State for a period or periods aggregating less than 90 days in the taxable year; in relation to Section 22(a) (1) of the Tax Code, as amended, stating "SEC. 22. Tax on Non-resident Alien Individuals . "(a) Non-resident alien engaged in trade or business within the Philippines: "(1) In general . Nonresident aliens engaged in trade or business in the Philippines shall be subject to tax in the same manner as resident citizens and aliens on taxable income received from all sources within the Philippines, except capital gains realized from buying and/or selling shares of stock of Philippine corporations listed in the dollar or any foreign currency board of stock exchange: Provided, That for purposes of this Title, a non-resident alien individual who shall come to the Philippines and stay therein for an aggregate period of more than 180 days during calendar year shall be deemed a non-resident alien doing business in the Philippines, Section 20(g) of this Code notwithstanding." llcd you are considered a non-resident alien not engaged in trade or business in the Philippines, and therefore, your entire compensation income received from Bechtel Overseas Corporation in the Philippines in the amount of US$21,424.08 for 1994 is exempt from Philippine income tax. Consequently, it is also exempt from withholding tax under Section 72 of the Tax Code, as amended. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue