Salaries/Wages of Expatriates from US-Based Corporation Terminated Due to Redundancy Tax-Exempt

March 24, 1993 BIR RULING NO. 115-93 SALARIES/WAGES OF EXPATRIATES FROM US-BASED CORPORATION TERMINATED DUE TO REDUNDANCY TAX-EXEMPT 22 000-00 115-93 Sycip Gorres Velayo & Co. 6760 Ayala Avenue, Makati Metro Manila Attention: Ma . Victoria A . Villaluz Tax Division This refers to your letter dated December 28, 1992 stating that your client, Halliburton Company (Halliburton) is a company organized and existing under the laws of the U.S.; that it has been engaged as a subcontractor for petroleum operation projects by the following petroleum contractors: (1) Trans-Asia Oil & Mineral Development Corporation; (2) Basic Petroleum and Minerals Corp.; (3) KR (Far East) Limited; (4) Australian Worldwide Exploration; (5) Alcorn International, Inc.; that all of the subcontractor projects were completed between the period beginning July 26, 1992 and September 3, 1992; that the service fees of Halliburton from the said contracts were all subjected to the 8% tax in accordance with Presidential Decree No. 1354; that for the said projects, Halliburton sent expatriates to the Philippines during the period of the contracts; that the said expatriates are nationals of different countries, such as Australia, Canada, Indonesia, Malaysia, Singapore, Thailand, United Kingdom and the United States; and that the said expatriates were in the Philippines for different durations from any average of 20 days to a maximum of 45 days. aisadc In connection therewith, you now request confirmation of your opinion to the effect that the salaries of the expatriates who stayed in the Philippines for less than 183 days are exempt from the 15% withholding tax imposed on alien personnel of petroleum contractors under Presidential Decree No. 1345 and consequently to the withholding tax pursuant to our tax treaties with the said countries. In reply thereto, I have the honor to inform you that pursuant to our tax treaties with Australia, Canada, Indonesia, Malaysia, Singapore, Thailand, United Kingdom and the United States, specifically on Dependent Personal Services, remuneration or income derived by a resident of Australia, Canada, Indonesia, Malaysia, Singapore, Thailand, United Kingdom and the United States with respect of an employment exercised in the Philippines are exempted in the Philippines if (a) the recipient is present in the Philippines for a period or periods not exceeding in the aggregate 90 days in the case of professional services and 120 or 183 days in other cases in the calendar year concerned; (b) the remuneration is paid by or on behalf of an employer who is not a resident of the Philippines; (c) the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the Philippines. Such being the case and since the list of expatriates with the corresponding duration of their stay in the Philippines which you submitted shows that the said expatriates were in the Philippines for different durations from an average of 20 days to a maximum of 45 days; that the remuneration is paid by Halliburton, which is a resident of the U.S.; and that the said remuneration will not be borne by the Philippine branch, the permanent establishment of Halliburton in the Philippines, the salaries, wages, compensations, remunerations and emoluments received by the aforementioned expatriates from Halliburton shall be exempt from the 15% final withholding tax imposed on aliens employed by petroleum service contractors and subcontractors under Section 22(e) of the Tax Code pursuant to our tax treaties with the aforesaid countries on Personal Services. However, with regard to the salaries and/or income of the two expatriates namely, Messrs. John Simmons and Htunn Lynn who are Fijian and Burmese nationals with whose countries we have no tax treaties, their salaries and/or income are subject to a final withholding tax of 15% pursuant to Section 22(e) of the Tax Code, as amended. This ruling is based on the facts presented so that if later on, it will be found that these are not true and correct, this ruling shall be considered null and void. cdtech EUFRACIO D. SANTOS Deputy Commissioner of Internal Revenue