Collection of Taxes from Persons Departing from the Philippine Islands or Retiring from Business

August 23, 1921 DOF REGULATIONS NO. 022-21 (Revised.) 1 SUBJECT : Collection of Taxes from Persons Departing from the Philippine Islands or Retiring from Business TO : All Internal Revenue Officers and Others Concerned BASIS OF THE REGULATIONS. Section 1435 of the Administrative Code, as amended by section 1, paragraph 2, of Act No. 2892: When it shall come to the knowledge of the Collector of Internal Revenue that a taxpayer is retiring from the business subject to taxation or intends to leave the Philippine Islands, or remove his property therefrom, or hide or conceal his property, or perform any act tending to obstruct the proceedings for collecting the tax for the past or current quarter or year, or render the same totally or partly inefficient, unless such proceedings are begun immediately, the Collector of Internal Revenue shall declare the tax period of such taxpayer due at any time and shall send the taxpayer a notice of such decision, together with a request for the immediate payment of the tax for the tax period so declared due and the tax for the preceding year or quarter, or such portion thereof as may be unpaid, and said taxes shall be due and payable immediately and shall be subject to all the penalties hereafter prescribed, unless paid within the time fixed in the request of the Collector of Internal Revenue. SECTION 1. Purpose and Scope. In order that the provisions of the foregoing section of law may be enforced with the least possible friction and discomfort to persons who are leaving the Philippine Islands, and to persons retiring from business, these regulations are hereby promulgated for the information and guidance of all internal revenue officers, including customs officials, and others concerned. SECTION 2. Definition of Terms. For the purposes of these regulations, the word "person" shall include both natural and juridical persons. The term "alien" shall be deemed to include everybody who is not a citizen of the Philippine Islands. "Non-resident alien individual" means a natural person ( a ) whose residence is not within the Philippine, Islands, and ( b ) who is not a citizen of the Philippine Islands. "Resident alien" includes any alien living in the Philippine Islands who is not a mere transient. "Non-resident foreign corporations" and "non-resident foreign organizations" are those having no office or place of business in the Philippine Islands, and temporarily operating in this country. SECTION 3. Transient Non-resident Aliens, Non-resident Foreign Corporations, or Non-resident Foreign Organizations Receiving Income from Philippine Sources. Transient non-resident aliens, non-resident foreign corporations, and non-resident foreign organizations, receiving or deriving income from sources within the Philippines such as traveling vaudeville players, acrobats, singers, members of opera companies, traveling salesmen, professionals, and all non-resident foreign corporations or organizations whose stay or operation in the Philippine Islands is of such duration that they can not be included within the term "resident aliens," or "resident corporations or organizations" but deriving income from sources within the Philippine Islands, should, before seeking passage for foreign countries, if individuals, call at the Office of the Collector of Internal Revenue in Manila or of the provincial treasurer of the province in which they may temporarily reside or have their places of business, and file income tax returns and pay whatever tax may be found to be due from them. In cases of non-resident foreign corporations or non-resident foreign organizations, their authorized representatives should call, within a reasonable time after said corporations or organizations have closed their business, at the Office of the Collector of Internal Revenue in Manila or of the provincial treasurer of the province in which they may temporarily reside or have their places of business, as the case may be, and file income tax returns and pay whatever tax may be found to be due from them. SECTION 4. (a) Resident aliens departing from the Philippine Islands. A resident alien who desires to depart from this country, should appear before the Collector of Internal Revenue at Manila, if he resides in this city, or before the provincial treasurer of the province in which he may reside or has his place of business, at least ten days before departure, and satisfy all income tax obligations with respect to income received or earned up to the time of departure. This means that the alien will be required to show that he has filed returns and paid all internal revenue and income taxes for prior years, and will also be required to file a return and pay any tax shown to be due for the taxable period in the current year. The taxable period referred to herein is the period from January 1st to the day of departure. Those desiring to depart from the Philippines prior to the last due date of any year's returns will be required to file a return of income for the preceding calendar year and pay any tax shown by such return to be due, and at the same time the taxable period for the current year will be declared terminated. (b) Permanent absence of resident aliens. If it is found that the alien has been a resident during the previous years, he shall not be deprived of that status for those years because he is now planning to depart from the Philippine Islands. He should be classed as a non-resident alien only from the taxable year during which he left or intended to leave the Islands, which intention to renounce the status of a resident alien was manifested by his conduct, acts, or declarations. Thus an alien who was a resident in 1919 applying for a passport in 1920 should not be deprived of his status as a resident alien in 1919, unless prior to January 1, 1920, a definite intention to depart was formed which was manifested by his conduct, acts, or declarations. It should be borne in mind that the status of the alien on the last day of the taxable period determines whether he should be classed a resident or non-resident alien for that period. For instance, an alien whose status was that of a resident on December 31, 1919, may determine in January, 1920, to leave the Philippines and actually secure passport and leave during January. In such case, the status of the alien will be that of a resident for the taxable period declared terminated December 31, 1919, and he should be taxed as such for that taxable period and not as a non-resident alien. (c) Temporary absence of a resident alien. A resident alien whose absence is to be only temporary should not be deprived of his status as a resident merely because he is outside of the country. This means that a resident alien who is going abroad only for reasons of health, business, or pleasure, but intends to come back should not be classed as a non-resident alien for the taxable period. Under such circumstances, however, either the taxable period of the resident alien should be declared terminated and the tax paid for such period, or the resident alien may appoint an attorney-in-fact to take care of his income tax liabilities whenever called upon by the Collector of Internal Revenue. SECTION 5. Persons Retiring from Business, etc. The requirement of filing the return as provided in these regulations shall also apply to all natural persons who retire or are about to retire from business, as well as to all juridical persons which retire from business, or are dissolved in whatsoever manner. These persons, natural, or juridical, should file, within thirty days after such retirement or dissolution, their income tax returns covering the profits earned or business done by them during the taxable period; that is, the period from the beginning of the taxable year to the date of retirement or dissolution, and pay the corresponding income tax due thereon: Provided, That in proper cases and in his discretion, the Collector of Internal Revenue may allow a reasonable extension of time for filing the return. SECTION 6. Filipino and American Citizens Leaving the Philippine Islands. A Filipino or American citizen who contemplates leaving the Philippine Islands should satisfy the Collector of Internal Revenue or the provincial treasurer of the province in which he may reside or has his place of business, that he has no pending income tax liabilities up to the time of his departure. In the event that for any reason he considers that he is not liable for the payment of the income tax, he should execute an affidavit to that effect before the Collector of Internal Revenue or any of his duly authorized agents. SECTION 7. Taxable Period of Filipino and Resident American Citizens. The taxable period of a Filipino or a resident American citizen should not be declared terminated in accordance with section 1435 of the Administrative Code (section 1, paragraph 2, of Act No. 2892 of the Philippine Legislature), unless the Collector of Internal Revenue or his duly authorized agent has reason to believe that the departing citizen intends to evade the payment of his income tax for the current year. SECTION 8. Departure Prior to Due Date of Annual Return. A Filipino or resident American citizen who leaves the Philippine Islands, prior to the due date of any annual or quarterly return, should not be required to file such return prior to the due date, but should be required to execute an affidavit to the effect that his absence will not extend beyond the time when such return is due, or in case he will be absent at such time, that an arrangement has been made for the filing of the return and the payment of the tax. The citizen may file his return and pay the tax instead of making such affidavit if he so desires. SECTION 9. (a) Other internal revenue taxes. For the payment and satisfaction of other internal revenue taxes, all persons whether aliens or Filipino citizens who, in accordance with the foregoing provisions, are required to appear before the Collector of Internal Revenue in Manila or the provincial treasurer of the province in which they may reside or have their places of business, and to file income tax returns and pay the corresponding income tax due before leaving the Philippine Islands for a foreign country, shall also be required to file a return of the gross receipts and earnings of their business for the determination and payment of the percentage and other internal revenue taxes that may be found to be due thereon. (b) Persons retiring from business, etc. The requirements as provided in the next preceding paragraph shall also apply to all natural persons who retire or are about to retire from business, as well as to all juridical persons which retire from business or are dissolved in whatsoever manner. These persons, natural or juridical, should file, within twenty days in Manila and thirty days in remote provinces, in the discretion of the Collector of Internal Revenue, after such retirement or dissolution, a return of the gross receipts of their business up to the time of retirement from business or dissolution, as the case may be, and pay the corresponding internal revenue taxes due thereon. HIAcCD SECTION 10. Certificate of Tax Clearance (B.I.R. Form No. 584). (a) Any alien, whether resident or non-resident, and any American or Filipino citizen who desires to leave the Philippines, should provide himself with a certificate of tax clearance signed by the Collector of Internal Revenue in Manila, or by the provincial treasurer of the province in which he may reside or has his place of business. (b) Unless hereinafter otherwise provided the certificate of tax clearance shall be produced by any person leaving the Philippine Islands upon demand of the customs officials. (c) In the case of persons departing for places for which no passports are required, the customs officials should use their discretion and judgment as to the truth of the passengers' statements in determining whether they are citizens or aliens. (d) Sovereigns of foreign governments and the members of their suites, whether personal or official, representatives of foreign governments bearing diplomatic passports, and consular agents and tourists not engaged in commerce in the Philippine Islands should, under no circumstances, be required to produce any certificate of tax clearance. (e) In those cases where a departing alien is not provided with a certificate of tax clearance, the customs officials and employees should advise the said person to secure from the Collector of Internal Revenue, if said alien resides in Manila, or from the provincial treasurer of the province in which he may reside or has his place of business, the said certificate: Provided, That if the departing alien does not have any taxable income during the period declared terminated, or is without any other tax liability, the internal revenue agents are hereby authorized to accept an affidavit to that effect from the departing alien and issue the corresponding certificate of tax clearance. cAaDHT SECTION 11. Cooperation of the Officials of Bureau of Customs. For the proper enforcement of these regulations, the Insular Collector of Customs at Manila, and the collectors of customs of the ports of Cebu, Iloilo, Zamboanga and Jolo, together with their respective employees, are hereby enjoined to give such necessary assistance as they may be able to render within their respective jurisdictions. SECTION 12. Penalties. Under the provisions of section 2741 of the Administrative Code, any person who violates any of the provisions of these regulations shall be punished by a fine of not more than three hundred pesos or by imprisonment for not more than six months, or both. SECTION 13. Effective Date. These regulations shall become effective fifteen days after their promulgation in the Official Gazette, and shall supersede Regulations No. 22 on the same subject promulgated in the Official Gazette on April 19, 1921. Manila, August 23, 1921. ALBERTO BARRETTO Secretary of Finance Footnotes 1. Promulgated, September 1, 1921, XIX Official Gazette, 1913.