DA ITAD BIR Ruling No. 059-06

May 30, 2006 DA ITAD BIR RULING NO. 059-06 Article 15, Philippines-UK tax treaty; BIR Ruling 115-93 Tan Acut & Lopez Law Offices 23rd Floor, Philippine Stock Exchange Center East Tower, Exchange Road, Ortigas Center 1604 Pasig City Attention: Atty. Edmundo L. Tan & Atty. Maritoni Z. Liwanag Gentlemen : This refers to your letter dated May 9, 2005 on behalf of your client, Mr. Alan Donald Stevens (Mr. Stevens), requesting confirmation that the remuneration of Mr. Stevens in acting as General Manager of the Manila representative office of InventAsia Limited is not subject to Philippine income tax, pursuant to the Republic of the Philippines-United Kingdom of Great Britain and Northern Ireland tax treaty (Philippines-United Kingdom tax treaty). It is represented that Mr. Stevens is a citizen of the United Kingdom of Great Britain (UK), with permanent address at 13 Lea Crescent, Longlevens, Gloucester, GL2, ODW, as confirmed by the letter from Mrs. H. Galbraith, Revenue Executive of the Inland Revenue of UK dated October 21, 2005; that he is presently employed as Operations Manager by InventAsia Limited (formerly MPP-Hongkong Limited as confirmed by the Amended Securities and Exchange Commission License No. FS200408500 dated March 17, 2005), a nonresident foreign corporation duly registered and existing under the laws of Hongkong, with registered office address at 12th Floor, China Merchants Tower; Shun Tak Center 168-200 Connaught Road, Central Hong Kong; that on June 9, 2004, InventAsia Limited was granted a license to establish a representative office in Manila for the purpose of engaging in information dissemination and support as confirmed by the License to Transact Business in the Philippines issued by the Securities and Exchange Commission under Company Registration No. FS200408500 dated June 9, 2004; that on July 1, 2004 InventAsia Limited appointed Mr. Stevens to act as a General Manager of the said Manila representative office; that in acting as a General Manager of the Manila representative office, Mr. Stevens spends time in the Philippines to carry out his oversight functions; that for the period between January 1 and December 31, 2004, Mr. Stevens stayed in the Philippines for an aggregate period of less than 180 days; and that the remuneration of Mt. Steven paid for in Sterling and Hong Kong dollars, is borne by InventAsia Limited. In reply, please be informed of Article 14 of the Philippines-United Kingdom tax treaty which provides as follows: "Article 14 Dependent Personal Services 1. Subject to the provisions of Articles 15, 16, 17, 18, 19 and 20, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State. 2. Notwithstanding the provisions of paragraph (1) of this Article, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if: (a) the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in the fiscal year concerned; and (b) the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State; and (c) the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State. HEcaIC 3. Notwithstanding the preceding provisions of this Article, remuneration in respect of employment as a member of the regular crew or complement or a ship or aircraft operation in international traffic by an enterprise of a Contracting State shall be taxable only in that State. Based on the above-quoted provisions, salaries, wages and other similar remuneration received by a resident of the United Kingdom in respect of an employment performed in the Philippines shall be taxable only in the United Kingdom when all these three (3) requirements are met, viz :. (1) he is present in the Philippines for a period or periods not exceeding in the aggregate 183 days in the fiscal year concerned; (2) the remuneration is paid by, or on behalf of, an employer who is not a resident of the Philippines; and (3) the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the Philippines. Considering that Mr. Stevens stayed in the Philippines for an aggregate period of 99 days in the year 2004, as attested to in the sworn statement by Ms. Liza C. Lara, another employee of the Manila representative office, dated June 16, 2005, and that his remuneration is paid for by InventAsia Limited and not borne by a permanent establishment of InventAsia Limited in the Philippines, thereby meeting all the requirements stated under Article 14 of the Philippines-United Kingdom tax treaty, then, the remuneration derived by Mr. Stevens as the acting General Manager of the Manila representative office is not subject to Philippine income tax. (BIR Ruling No. 115-93 dated March 24, 1993) This ruling is issued based on the facts as represented. However, if upon investigation it shall be disclosed that the facts are different, then this ruling shall be without force and effect insofar as the herein parties are concerned. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner