Whether the Consultancy Fee of a Dutch Citizen Who Was Hired by the Department of Energy as a Consultant is Exempt from Tax

October 12, 1995 BIR RULING NO. 154-95 28 (B) (6) 000-00 154-95 Mr. Arturo V. Baloaloa Director for Legal Services Department of Energy PNPC Complex, Merritt Rd. Fort Bonifacio, Metro Manila S i r : This refers to your letter dated July 31, 1995 requesting for a ruling as to whether or not the consultancy fee of Dr. Jan P. Krynen, a Dutch citizen with address at P.O. Box 53 Orange 2800, New South Wales, Australia, who was hired by the Department of Energy as a consultant is exempt from tax. It is represented that a Consultancy Contract was entered into by and between the Department of Energy (DOE) and Dr. Jan P. Krynen relative to the DOE approved locally-funded project entitled "Larger Foraminiferal Biostratigraphy of the Philippines which focuses on Cenozoic carbonate rocks within Oligocene Miocene oil-bearing horizons in the Philippine, particularly in the Southwestern part of Mindoro"; and that the research project shall have a duration of one year and the services of the consultant shall be engaged within the four (4) phases of the project: a. Fieldwork phase April 18 - 30, 1995; b. Processing and analysis including the training of the technical staff-April 30 to May 15, 1995; c. Two-week on-the-job training of the technical staff within the month of July 1995. d. Report writing phase August to December, 1995 In reply thereto, please be informed that Article 14 of the RP-Netherlands Tax Treaty provides viz. : "ARTICLE 14 "INDEPENDENT PERSONAL SERVICES "1. Income derived by a resident of one of the States in respect of professional services or other independent activities of a similar character shall be taxable only in that State unless he has a fixed base regularly available to him in the other State for the purpose of performing his activities. If the has such a fixed base, the income may be taxed on the other. State but only so much of it as is attributable to that fixed base. "2. The term "professional services" includes especially independent scientific, literally, artistic, educational or teaching activities as well as the independent activities of physicians, lawyers, engineers, architects, dentists and accountants." Since Dr. Jan P. Krynen has no fixed base regularly available to him in the Philippines for the purpose of performing his activities, but will actually be staying in the Philippines within the duration of the aforementioned four (4) phases of the project, the consultancy fee and other payments to him are not subject to income tax. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue