BIR Ruling [UN-176-94]

June 8, 1994 BIR RULING [UN-176-94] Department of Environment and Natural Resources (DENR) Visayas Avenue, Diliman Quezon City Attention: Mr . Lope D . Reyes Gentlemen : This refers to your letter dated May 27, 1994 requesting in effect, a confirmation of your opinion that the salary received by Dr. Goran Nilsson Axberg, Project Consultant, from the Swedish Agency for International Technical and Economic Cooperation (BITS) arising from the joint bilateral aid project funded by the Swedish Environment in favor of the DENR is not subject to Philippine income taxation pursuant to RP SWEDEN Tax Treaty. cdtech Documents submitted disclosed that in 1990, the Philippine Government thru DENR requested the Swedish Government for technical assist once in the implementation of a project titled "Community-based Forest Management of Logged-Over Areas Project"; that as a result, Dr. Goran Nilsson Axberg, a Swedish Citizen, worked here in the Philippines for more than a year (April 23, 1993 to June 30, 1994) as Chief Technical Adviser for the said Project; that the said project is a joint bilateral aid project funded by the Swedish Agency for International Technical and Economic Cooperation (BITS) of the Government of Sweden and the DENR; that the salary of Dr. G. Axberg is fully generated and paid in Sweden. In reply, please be informed that your opinion that the salary received by Dr. Goran Nilsson Axberg as Project Consultant, from the Swedish Agency for International Technical and Economic Cooperation (BITS) of the Government of Sweden, arising from the joint bilateral aid project, viz, as Chief Technical Adviser on full time basis for the Community-Based Management of Logged-Over Area Project at the Department of Environment and Natural Resources, is not subject to Philippine income taxation is hereby confirmed, pursuant to the RP-Sweden Tax Treaty. Article 18 of the said treaty provides, thus: GOVERNMENT SERVICE 1. (a) Remuneration, other than a pension paid by a Contracting State or a political subdivision or a local authority thereof to any individual in respect of services rendered to that State or subdivision or local authority thereof shall be taxable only in that State. (b) However, such remuneration shall be taxable only in the other Contracting State if the services are rendered in that State and the recipient is a resident of that State who: (i) is a national of that State; or (ii) did not become a resident of that State solely for the purpose of performing the services. xxx xxx xxx" It must be noted however, that in the absence of treaty stipulations, income received by a resident alien from all sources are subject to Philippine income taxation [Secs. 21 and 36(b) (3) of the Tax Code, as amended]. (BIR No. 2-90 dated January 4, 1990). casia Very truly yours, ALICIA P. CLEMENO Acting Assistant Commissioner (Legal Service)