Income Tax Case of Mr. Cosme de Churruca

May 25, 1960 BIR RULING NO. 250-60 The Regional Director B.I.R. Regional District No. 3 M a n i l a S i r : This is in connection with your letter dated March 22, 1960, referring to the income tax case of Mr. Cosme de Churruca. The question to be resolved here is whether or not the aforesaid taxpayer should be considered as engaged in trade or business within the Philippines during the calendar year 1954, when he received the bonus in the total amount of P9,221.11. The records of this case show that taxpayer left the Philippines in 1953 after having been employed by Cia Tabacalera from the years 1923 up to 1953, inclusive. Apparently, he retired as an employee upon leaving the Philippines (Memorandum of the Chief, Tax Audit Branch, dated October 9, 1959). As taxpayer was no longer in the employ of the company in 1954 when he received his bonus, it is obvious that he was not and cannot be engaged in business during that taxable year. It should be remembered that such taxable year is independent of and separate from every other taxable year. Income should be reported on the basis of a fixed period or taxable year. It may be stated that the mere act of receiving bonus in 1954 does not constitute a trade or business within the meaning of section 22(a) of the Tax Code, although the bonus was granted in consideration of services rendered for previous taxable years. Section 53(b) of the Tax Code recognizes the fact that a nonresident alien individual not engaged in trade or business in the Philippines maybe the recipient of compensation, remuneration and emoluments. The bonus given to taxpayer or pension given to former residents of the Philippines who left the Philippines and actually abandoned residence here are typical examples of compensation or remuneration received by a nonresident alien individual subject to withholding at the flat rate prescribed in section 22(b) of the Tax Code. In view of the foregoing, Mr. Cosme de Churruca should be considered a nonresident alien individual not engaged in trade or business for 1954. cdt Very truly yours, (SGD.) MELECIO R. DOMINGO Commissioner of Internal Revenue