DA ITAD BIR Ruling No. 160-06

December 15, 2006 DA ITAD BIR RULING NO. 160-06 Article 21, Philippines-Austria tax treaty; BIR Ruling No. DA-ITAD-28-06 European International School No. 75 Swaziland Street Better Living Subdivision Paraaque City Attention: Mr. Ludwig Etzel Administrator Deutsche Schule Manila Gentlemen : This refers to your letter dated September 11, 2005, applying for tax treaty relief on the salaries and/or other emoluments received by Mr. Christoph Norbert Balssnig, a teacher engaged to teach in Deutsche Schule Manila (DSM), for a period of not exceeding two (2) years, pursuant to Article 21 of the Philippines-Austria tax treaty. It is represented that DSM is the German component of the European International School with principal address at No. 75 Swaziland St., Better Living Subdivision, Paraaque City; that Mr. Christoph Norbert Balssnig was, immediately before his employment in the Philippines, a resident of the Republic of Austria with address at Hochschaberstra b e, Lienz, Tirol, Austria; that Mr. Balssnig has formally given notice of his departure from his residence in Lienz and is now residing in Metro Manila as evidenced by the Acknowledgement Letter issued by the local authorities in Lienz dated August 11, 2006; that DSM entered into a Contract of Local Employment with Mr. Balssnig engaging the latter to teach at DSM for the School Year 2006-2008 from August 1, 2006 to July 31, 2008. In reply, please be informed that Article 21 of the Philippines-Austria tax treaty provides as follows: "ARTICLE 21 PROFESSORS AND TEACHERS 1. Remuneration which a professor or teacher, who is a resident of one of the Contracting States and who visits the other Contracting State for a period not exceeding two years for the purpose of teaching or carrying out advanced study or research at a university, college, school or other educational institution, receives for those activities shall be taxable only in the first-mentioned State. 2. This Article shall not apply to remuneration which a professor or a teacher receives for conducting research if the research is undertaken primarily for the private benefit of a specific person or persons. aITECA 3. For the purposes of paragraph 1 of this Article, the term "remuneration" shall include remittances from sources outside the other State sent to enable the professor or teacher to carry out the purposes referred to in paragraph 1." Based on the aforequoted provision, it is clear that the remuneration paid to a teacher who is a resident of Austria and who stays in the Philippines for the purpose of teaching for a period not exceeding two years shall not be subject to Philippine income tax. In view thereof, and considering that Mr. Balssnig was a resident of Austria immediately before his employment in the Philippines, this Office is of the opinion and so holds that the subject remuneration of Mr. Christoph Norbert Balssnig for teaching in DSM for a period not exceeding two (2) years, shall not be subject to Philippine income tax pursuant to Section 21 of the Philippines-Austria tax treaty. (BIR Ruling No. DA-ITAD 28-06 dated March 16, 2006) This ruling is issued on the basis of the facts as represented. However, if upon investigation it shall be disclosed that the actual 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 Legal Service