International School Manila, Inc.

February 7, 2020 ITAD BIR RULING NO. 018-20 Executive Order No. 31; Executive Order No. 98 International School Manila, Inc. University Parkway, Fort Bonifacio 1634, Taguig City Attention: AAA ________________ Gentlemen : This refers to your letter dated 13 June 2019 requesting for a Certificate of Exemption from the Tax Identification Number (TIN) Requirement in favor of BBB (BBB) and CCC (CCC), foreign trustees of the International School Manila. Inc. (ISM) for the reason that their protocols do not require them to secure TIN in the Philippines. HTcADC It is represented that BBB works for the Asian Development Bank (ADB) as its _______________ for Information Systems Technology Office while CCC is a ________________ at the United States (US) Embassy; that they are both accredited diplomats as confirmed by the Department of Foreign Affairs (DFA) and members of the Board of Trustees of the ISM; that Memorandum Circular No. 1, series of 2013, of the Securities and Exchange Commission (SEC) mandates the incorporation of the TIN of foreign investors in all forms, papers and documents filed with the said Office by corporations and partnerships after their incorporation; and that despite ISM's submission to the SEC of DFA Certification confirming the accreditation of BBB and CCC as diplomats and their entitlement to tax exemption privileges, the SEC still required the ISM to submit a Certification from the Bureau of Internal Revenue confirming that they are indeed exempt from the requirement of securing a TIN in relation to their membership as trustees of the ISM; hence, this request. In reply, please be informed that Section 1 of Executive Order (EO) No. 98 1 issued on 28 April 1999 provides, viz. : "EXECUTIVE ORDER NO. 98 xxx xxx xxx Section 1. All government agencies and instrumentalities, including Government-Owned and/or Controlled Corporations, and all Local Government Units, are hereby directed to incorporate the Taxpayer Identification Number (TIN) in all forms, permits, licenses, clearances, official papers and documents which they issue to persons transacting business with them, be they natural or judicial. x x x" In connection thereto, Sections 1 and 2 of EO No. 31 issued on 13 August 2001 provide that: "EXECUTIVE ORDER NO. 31 Amending Executive Order No. 98 dated April 28, 1999 by Exempting therefrom Diplomatic Missions and International Organizations as well as their Accredited Foreign Personnel xxx xxx xxx Section 1. Diplomatic Missions and International Organizations, as identified by the Department of Foreign Affairs, together with their accredited foreign personnel, are hereby exempted from the requirements of the Taxpayer Identification Number when they apply for any Government permit, license, clearance, official paper or document; Section 2. For the purpose of establishing the bona fides of such entities and individuals, it shall be sufficient that their request for above-named documentation is accompanied by the corresponding endorsement of the Department of Foreign Affairs, which shall include the official identity card issued by the Office of Protocol of the Department. x x x (Underscoring supplied)" CAIHTE It is clear from EO No. 31 that members of diplomatic missions and international organizations are not required to secure a TIN when they apply for any government permit, license, clearance, official paper or document. The same exemption does not extend, however, if the purpose for which they are required to secure a TIN is not connected with their official capacities as members of diplomatic missions. In the instant case, the ISM is the one transacting with the SEC and not the foreign trustees. Moreover, being a member of the Board of Trustees (BOT) of an international school is already beyond their official duties as diplomats. As such, BBB and CCC are, in effect, foreign investors of the ISM and shall be treated on the same footing as members of the Board of Directors of a regular corporation. It should likewise be noted that the exemption granted to them under the Vienna Convention on Diplomatic Relations (VCDR) and the Agreement between the Asian Development Bank and the Government of the Republic of the Philippines Regarding the Headquarters of the Asian Development Bank (ADB Headquarters Agreement) extends only to their income for services rendered for the sending State and the ADB, and does not extend to other types of income. In this regard, Article 34 (d) of the VCDR and Section 45 (b) of the ADB Headquarters Agreement, provide, viz. : "Article 34 A diplomatic agent shall be exempt from all dues and taxes, personal or real, national, regional or municipal, except : ( a ) Indirect taxes of a kind which are normally incorporated in the price of goods or services; ( b ) Dues and taxes on private immovable property situated in the territory of the receiving State, unless he holds it on behalf of the sending State for the purposes of the mission; ( c ) Estate, succession or inheritance duties levied by the receiving State, subject to the provisions of paragraph 4 of article 39; ( d ) Dues and taxes on private income having its source in the receiving State and capital taxes on investments made in commercial undertakings in the receiving State; ( e ) Charges levied for specific services rendered; aScITE ( f ) Registration, court or record fees, mortgage dues and stamp duty, with respect to immovable property, subject to the provisions of article 23. ( Underscoring supplied )" "Section 45 Officers and staff of the Bank, including for the purposes of this Article experts and consultants performing missions for the Bank, shall enjoy the following privileges and immunities: xxx xxx xxx (b) Exemption from taxation on or in respect of the salaries and emoluments paid by the Bank subject to the power of the Government to tax its nationals; x x x (Underscoring supplied)" Thus, any compensation (fees, salaries, wages, commissions, honorarium, and similar items) for their services as members of the BOT of the ISM, shall be subject to income tax in the Philippines. For the purpose of withholding taxes on such income, BBB and CCC are, therefore, obliged to secure their respective TINs. In view of the foregoing, this Office is of the opinion and hereby rules that BBB and CCC are not exempt from securing a TIN in relation to their membership as trustees of the ISM. Your request for a Certification of Exemption from the TIN Requirement is hereby denied for lack of merit and legal basis. Very truly yours, (SGD.) CAESAR R. DULAY Commissioner of Internal Revenue Footnotes 1. Directing All Government Agencies, Instrumentalities, Local Government Units, and Government-Owned and/or Controlled Corporations (GOCCs) to Include the Taxpayer Identification Number (TIN) as Part of the Essential Requirements in All Applications for Government Permit, License, Clearance, Official Paper or Document.