Department of Foreign Affairs

March 5, 2018 ITAD BIR RULING NO. 024-18 Section 32 (B) (5), National Internal Revenue Code of 1997, as amended; Article 3, Cooperation Agreement between the Government of the Republic of the Philippines and the International Organization for Migration; Article III, Convention on the Privileges and Immunities of the Specialized Agencies; BIR Ruling No. 378-12 Department of Foreign Affairs 2330 Roxas Boulevard 1300 Pasay City Attention: Director Rodillo R. Catalan Immunities and Privileges Office of Protocol Gentlemen : This refers to the letter of the International Organization for Migration (IOM) dated 22 August 2017, as indorsed by your office and the Department of Finance, requesting the Bureau of Internal Revenue (BIR) for the issuance of an updated ruling on the tax exemption of IOM's interest income, as required by the China Banking Corporation (Chinabank). AacCIT In reply, please be informed that Section 32 (B) (5) of the National Internal Revenue Code of 1997, as amended (Tax Code), provides that: "Sec. 32. Gross Income. (B) Exclusions from Gross Income. The following items shall not be included in gross income and shall be exempt from taxation under this Title: (5) Income Exempt under Treaty. Income of any kind, to the extent required by any treaty obligation binding upon the Government of the Philippines." In connection thereto, Article 3 of the Cooperation Agreement between the Government of the Republic of the Philippines and the International Organization for Migration (PH-IOM Cooperation Agreement) provides that: "Article 3 1. The Organization shall enjoy in the Republic of the Philippines the same privileges and immunities as those granted to specialized agencies of the United Nations by virtue of the Convention on the privileges and immunities of the specialized agencies of 21 November 1947." (Underscoring provided) Relative thereto, Article III, Section 9 (a) of the Convention on the Privileges and Immunities of the Specialized Agencies (Convention), states that: "ARTICLE III Property, funds and assets Section 9 The specialized agencies , their assets, income and other property shall be: (a) Exempt from all direct taxes ; it is understood, however, that the specialized agencies will not claim exemption from taxes which are, in fact, no more than charges for public utility services" ; (Underscoring provided) In view of the foregoing, income of any kind derived by specialized agencies shall be exempt from all direct taxes. Hence, IOM shall enjoy in the Philippines the same privileges and immunities as those granted to specialized agencies of the United Nations, such as tax exemption of interest income. It is worthy to mention, however, that interest income derived by officials of IOM from their accounts maintained with local banks, are not exempt from taxation. Article 4 of the PH-IOM Cooperation Agreement provides: "Article 4 The Director and the Deputy Director General of the Organization, on the one hand, and on the other hand, the staff of the Organization shall enjoy in the Republic of the Philippines the same privileges and immunities as those granted to executive heads and to the staff, respectively, of specialized agencies of the United Nations by virtue of the Convention on the privileges and immunities of the specialized agencies of 21 November 1947." Moreover, the Convention states, to wit: "ARTICLE VI Officials Section 19 Officials of the specialized agencies shall: (b) Enjoy the same exemptions from taxation in respect of the salaries and emoluments paid to them by the specialized agencies and on the same conditions as are enjoyed by officials of the United Nations" ; Meanwhile, the Convention on the Privileges and Immunities of the UN provides that: "Article V OFFICIALS SECTION 18. Officials of the United Nations shall: (6) Be exempt from taxation on the salaries and emoluments paid to them by the United Nations" ; Based on the foregoing, this office is of the opinion that interest income derived by IOM itself as an organization is exempt from direct taxes pursuant to PH-IOM Cooperation Agreement and the Convention. However, officials of IOM are only exempt from taxes on the salaries and emoluments paid to them by IOM. There is no provision that exempts IOM officials from taxes on their interest income. (BIR Ruling No. 378-12 dated November 20, 2012) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) CAESAR R. DULAY Commissioner of Internal Revenue