International School Manila

April 3, 2018 ITAD BIR RULING NO. 066-18 Article 21 (Teachers and Researchers) Philippines-France tax treaty, as amended International School Manila University Parkway Fort Bonifacio 1634 Taguig City Attention: AAA __________ Gentlemen : This refers to your tax treaty relief application filed on November 13, 2012 requesting confirmation that remuneration paid by International School Manila, Inc. (" International School ") to BBB (" BBB ") is exempt from income tax pursuant to the Convention between the Government of the Republic of the Philippines and the Government of the French Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income ( "Philippines-France tax treaty" ). 1 FACTS It is represented that BBB is a citizen and a resident of France based on her passport and Certificate of Residence issued by the Ministre De L'Economie Et Des Finances of France; that the name BBB is not a registered business name in the Philippines based on a certification issued by the Department of Trade and Industry; that she has an Overseas Hire Contract with International School where she was contracted to teach for school years August 2012 to July 2014; and that International School is a private, non-profit, non-sectarian day school for boys and girls from Preschool to Grade 12. 2 RULING In reply, please be informed that BBB ,by reason of her stay in the Philippines for more than 180 days as a result of her employment, is considered a nonresident alien individual engaged in trade or business under Section 25 (A) (1) of the National Internal Revenue Code of 1997, as amended (" Tax Code "),to wit: HTcADC " SEC. 25. Tax on Nonresident Alien Individual. (A) Nonresident Alien Engaged in Trade or Business Within the Philippines. (1) In General. A nonresident alien individual engaged in trade or business in the Philippines shall be subject to an income tax in the same manner as an individual citizen and a resident alien individual, on taxable income received from all sources within the Philippines. A nonresident alien individual who shall come to the Philippines and stay therein for an aggregate period of more than one hundred eighty (180) days during any calendar year shall be deemed a 'nonresident alien doing business in the Philippines,' Section 22 (G) of this Code notwithstanding." Under Section 25 (A) (1), BBB 's income is taxed in the same manner as that derived by resident Filipino citizens and resident aliens in the Philippines, particularly: " TAX ON INDIVIDUALS " SEC. 24. I ncome Tax Rates. (A) Rates of Income Tax on Individual Citizen and Individual Resident Alien of the Philippines. xxx xxx xxx (2) Rates of Tax on Taxable Income of Individuals. The tax shall be computed in accordance with and at the rates established in the following schedule: Not over P10,000 5% Over 10,000 but not over P30,000 P500+10% of the excess over P10,000 Over P30,000 but not over P70,000 P2,500+15% of the excess over P30,000 Over P70,000 but not over P140,000 P8,500+20% of the excess over P70,000 Over P140,000 but not over P250,000 P22,500+25% of the excess over P140,000 Over P250,000 but not over P500,000 P50,000+30% of the excess over P250,000 Over P500,000 P125,000+32% of the excess over P500,000. For married individuals, the husband and wife, subject to the provision of Section 51 (D) hereof, shall compute separately their individual income tax based on their respective total taxable income: Provided, That if any income cannot be definitely attributed to or identified as income exclusively earned or realized by either of the spouses, the same shall be divided equally between the spouses for the purpose of determining their respective taxable income. Provided, That minimum wage earners as defined in Section 22 (HH) of this Code shall be exempt from the payment of income tax on their taxable income: provided, further, That the holiday pay, overtime pay, night shift differential pay and hazard pay received by such minimum wage earners shall likewise be exempt from income tax." However, under Section 32 (B) (5) of the Tax Code, such income is exempt to the extent required by any treaty obligation on the Philippine government, to wit: " SEC. 32. Gross Income. xxx xxx xxx (B) Exclusions from Gross Income. The following items shall not be included in gross income and shall be exempt from taxation under this Title: xxx xxx xxx (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 this regard, Article 21 of the Philippines-France tax treaty provides relief to visiting teachers from France, thus: " Article 21 TEACHERS AND RESEARCHERS 1. A teacher or a researcher who, resident of a Contracting State, visits the other Contracting State for the purpose of teaching or engaging in research shall be exempt from tax in that other Contracting State for a period not exceeding two years on remuneration in respect of such activities. 2. This Article shall not apply to income from research if such research is undertaken not in the general interest but primarily for the private benefit of a specific person or persons." Under Article 21, a teacher resident of France who visits the Philippines for the purpose of teaching shall be exempt from tax in the Philippines for a period not exceeding two years on remuneration in respect of teaching. Accordingly, since BBB is a resident of France and has a contract to teach with International School ,remuneration paid to her by International School is exempt from income tax in the Philippines for a period not exceeding two years pursuant to Article 21 of the Philippines-France tax treaty. Based on the date of arrival stamped on her passport, the exemption is valid from July 22, 2012 to July 21, 2014 ;thereafter, BBB 's remuneration is taxed in the Philippines in accordance with Section 25 (A) (2) of the Tax Code. aScITE This ruling is issued on the basis of the foregoing facts as represented. However, if upon investigation it shall be disclosed or discovered 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, (SGD.) CAESAR R. DULAY Commissioner of Internal Revenue Footnotes 1. As amended by the Protocol to the Tax Convention between the Government of the Republic of the Philippines and the Government of the French Republic Signed on January 9, 1976 effective January 1, 1998 . 2. http://www.ismanila.org/About-Us .