Taxability of a Non-resident Citizen

August 18, 1986 BIR RULING NO. 150-86 20 (c) (1) & (2) 000-00 150-86 S i r : This refers to your letter dated May 14, 1986 requesting a ruling on a query stated as follows: "I am a U.S. Citizen, retired, living on the income from my investments (investments in countries other than the U.S.A. and R.P.).My wife is a Philippine citizen. We spend our life travelling around in the world (on tourist visas when not in the countries of our respective citizenship).We do not have any permanent residence anywhere. "The basic question is whether my wife would be considered by the B.I.R.,for tax purposes, to be a Non-Resident Citizen under these circumstances. If so, I propose to transfer my investment assets to my wife's name. This would be advantageous for me because the tax would be much less than what I pay to the I.R.S. It would also be advantageous for the R.P. because it would be deriving revenue that it does not now have. "I might point that this situation closely resembles that of a Filipina employed by a foreign family that spend its time travelling all around in the world. As a matter of fact, if there is no other possibility, would it be possible for me to formally offer my wife employment, to thus place her in the well-defined category of contract workers?" In reply thereto, I have the honor to inform you that your question is answered in the negative. Section 2 of Revenue Regulations No. 1-79 amplifying Section 20(c)(1) and (2) of the Tax Code defines the term "non-resident citizen" as one who establishes to the satisfaction of the Commissioner of Internal Revenue the fact of his physical presence abroad with the definite intention to reside therein and shall include any Filipino who leaves the country during the taxable year as: (a) Immigrant one who leaves the Philippines to reside abroad as an immigrant for which a foreign visa as such has been secured. (b) Permanent employee one who leaves the Philippines to reside abroad for employment on a more or less permanent basis. (c) Contract worker one who leaves the Philippines on account of a contract of employment which is renewed from time to time within or during the taxable year under such circumstances as to require him to be physically present abroad most of the time during the taxable year. To be considered physically present abroad most of the time during the taxable year, a contract worker must have been outside the Philippines for not less than 183 days during such taxable year. Any such Filipino shall be considered a non-resident citizen for such taxable year with respect to the income he derived from foreign sources from the date he actually departed from the Philippines. A Filipino citizen who has been previously considered as a non-resident citizen and who arrives in the Philippines at any time during the taxable year to reside therein permanently shall also be considered a non-resident citizen for the taxable year in which he arrived in the Philippines with respect to his income derived from sources abroad until the date of his arrival. In view thereof, and considering that your wife is travelling on a tourist visa and that she does not have any permanent residence abroad, this Office is of the opinion as it hereby holds that your wife is not a non-resident citizen within the contemplation of Section 20(e)(1) and (2) of the Tax Code as implemented by Revenue Regulations No. 1-79. cdtech Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner