Amended Guidelines on Foreclosure of Real Estate Mortgage (REM)

January 12, 1973 REVENUE MEMORANDUM CIRCULAR NO. 17-73 SUBJECT : Publishing the Pertinent Provisions of Presidential Decree No. 69 on the Taxation of Non-resident Citizens of the Philippines TO : All Internal Revenue Officers and Others Concerned Quoted hereunder are pertinent provisions of Presidential Decree No. 69, amending the National Internal Revenue Code: "Section 2. Certain sections of Title II of the same Code, as amended, are hereby further amended to read as follows: "TITLE II INCOME TAX "SEC. 21. Rates of Tax on Citizens or Residents . A tax is hereby imposed upon the taxable net income received during each taxable year from all sources by every individual, whether a citizen of the Philippines residing therein or an alien residing in the Philippines, determined in accordance with the following schedule: Provided, however, That non-resident citizens shall be subject to tax under this schedule only on income derived by them from sources within the Philippines: xxx xxx xxx " Provided, further , That on the income of non-resident citizens from all sources without the Philippines, there is hereby imposed a tax on the gross amount of such income determined as follows: Not over $6,000 1% Over $6,000 but not over $20,000 2% Over $20,000 3% " Provided, still further , That for purposes of this section a non-resident citizen is one who establishes to the satisfaction of the Commissioner the fact of his physical presence abroad for an uninterrupted period which includes an entire taxable year." xxx xxx xxx "Sec. 12. Effective Date . Except as otherwise provided specifically, and except the tax on the income of non-resident citizens under the amendment to Section 21 which shall apply to income beginning January one, nineteen hundred and seventy-two, the provisions of this Decree, takes effect on January one, nineteen hundred and seventy-two." Features of the Amendment The above quoted provisions have introduced the following new features: (1) Section 21 of the National Internal Revenue Code, as amended, imposes a tax upon non-resident citizens on their gross income received from sources without or outside the Philippines at the following rates: Not over $6,000 1% Over $6,000 but not over $20,000 2% Over $20,000 3% (2) A non-resident citizen is one who is actually residing abroad for an uninterrupted period during the entire taxable year. (3) There are two methods of taxing non-resident citizens, to wit: (a) Income derived by them from sources within the Philippines shall be taxed in accordance with the provisions of the Tax Code applicable to resident citizens and resident aliens. Accordingly, their net income from Philippine sources shall be subject to the rates of tax prescribed in Section 21 of the Tax Code. And since this kind of income is taxable in the same manner and at the same rate as the income of resident citizens and resident aliens, they may deduct from such income all the items allowable under Section 30, and claim the personal and additional exemption provided for in Section 23, both of the National Internal Revenue Code. (b) Income derived by them from sources without or outside the Philippines shall be taxed at the rates mentioned in paragraph (1), which shall be based on the gross amount of such income. The tax on this kind of income being based on gross amount thereof, no deduction whatever shall be allowed. Neither can the taxpayer claim personal and additional exemptions in connection with said income, for to allow such exemptions would in effect change the "gross-income" basis of the tax. And considering that this kind of income is given a special tax treatment, the taxpayer is not allowed to claim tax credit for income tax paid thereon to any foreign government. (4) The method of taxing the gross income of non-resident citizens from sources outside the Philippines applies to such income earned beginning January 1, 1972. (5) Non-resident citizens deriving income from sources within and without the Philippines should file two returns, namely: (a) BIR Form No. 17.01 or BIR Form No. 17:01-A, for income derived from sources within the Philippines, if said income amounts to P1,800.00; and (b) BIR Form No. 17.01-C, for income derived from sources without the Philippines. (7) A non-resident citizen whose annual gross income from sources within the Philippines does not amount to P1,800.00 need not report said income. However, if he derives income from sources outside the Philippines, he should report said income, regardless of the amount thereof, in BIR Form No. 17.01-C. (8) A non-resident citizen may file his income tax return with the Philippine Embassy or Office of the Philippine Consulate General nearest to his place of residence, or mail such return directly to the Commissioner of Internal Revenue, together with an international money order, bank draft or manager's check for the amount of the tax due from him, which should be payable to the Commissioner of Internal Revenue. Said income tax return and money order, bank draft or manager's check should be mailed on such a date as to reach the Philippine Embassy, Philippine Consulate General or the Commissioner of Internal Revenue on or before April 15 following the year for which the return is being filed. Enforcement and Publicity All internal revenue officers and others charged with the enforcement of internal revenue laws are enjoined to enforce the provisions of this circular accordingly and to give it as wide a publicity as possible. MISAEL P. VERA Commissioner of Internal Revenue APPROVED: CESAR VIRATA Secretary of Finance