Return of Income of a Non-resident Foreign Corporation

April 7, 1960 BIR RULING NO. 177-60 Stewart, Cunanan & Co . 107 18th Street, Port Area P.O. Box 2288 M a n i l a Gentlemen : This is in reply to your letter dated February 4, 1960, containing the following query: "Before the amendment of the income tax law by Republic Act No. 2343, the rate of withholding tax on the fixed or determinable income of non-resident foreign corporations was 24% while the income tax rates due on the same income were 20% on the first P100,000 and 28% on the excess. It was then necessary for the non-resident foreign corporation to file its own income tax return in order that it may be entitled to a refund if the tax withheld was more than the income tax due, or to enable the government to collect the difference if the reverse is true. However, after the amendment of the law by Republic Act No. 2343, the rates of withholding tax and income on the fixed and determinable income of non-resident foreign corporations are now the same both straight 30%. Assuming that the withholding agent has withheld the tax and paid the same to the government, would it still be necessary for the non-resident foreign corporation to file its own income tax return considering that there would be no more overpayment or underpayment to adjust?" Every foreign corporation having income from sources within the Philippines must make a return of income on the prescribed form for corporations. If such corporation has no office or place of business in this country, but has a resident agent therein, the latter shall make and file the return. Although the foreign corporation is not engaged in business in this country, and has no office, branch or agency in the Philippines, it is required to make a return if it has received income from sources within the Philippines. (Section 186, Revenue Regulations No. 2). In other words, a foreign corporation is subject to income tax for income derived from sources within the Philippines. Under the National Internal Revenue Code, every corporation subject to tax, irrespective of whether it realized gain, incurred losses or is not operating at all must file the required corporate income tax return. It is significant to note that Republic Act No. 2343 in amending the income tax rates of corporations, domestic or foreign, has not in any way amended this particular provision of the Tax Code. Therefore, as long as the non-resident foreign corporation referred to in the above-quoted query derives income from sources within the Philippines, said corporation should file its income tax return in the manner provided for by law, even if the withholding agent has already withheld the tax and paid the same to the Philippine Government. Non-resident foreign corporations filing income tax returns on the calendar year basis should file their returns on or before April 15 following the close of the of the preceding calendar year or on or before the 15th day of the 4th month following the close of the fiscal year designated, in case of non-resident foreign corporations filing returns on the basis of a fiscal year. lexlib Very truly yours, (SGD.) MELECIO R. DOMINGO Commissioner of Internal Revenue