ITAD BIR Ruling No. 127-13

May 6, 2013 ITAD BIR RULING NO. 127-13 Revenue Regulations No. 2-98, as amended; Withholding Tax Duties on Compensation Income of the Delegation of the European Commission in the Philippines Ongkiko Manhit Custodio & Acorda Law Offices 15th Floor, Citibank Tower 871 Paseo de Roxas Makati City Attention: Atty. Demetrio C. Custodio, Jr. & Aida Rose E. Villanueva Gentlemen : This refers to your letter dated March 15, 2013 requesting confirmation that the Delegation of the European Commission (Delegation) in the Philippines is exempted from the duty of withholding taxes on its income payments to its Filipino staff members' compensation income. It is represented that the Delegation is a full-fledged diplomatic mission which officially represents the European Commission in the Philippines and being an international organization it is exempted from the requirement of withholding taxes on compensation paid to its Filipino employees. Based on the above representation, you now seek to validate the said exemption. In reply, please be informed that Revenue Regulations No. 2-98, as amended exempts foreign governments or international organizations from the requirement of withholding tax on compensation for services rendered by its Filipino employees, to wit: "Sec. 2.78.1. Withholding of Income Tax on Compensation Income. xxx xxx xxx (B) Exemptions from withholding tax on compensation. The following income payments are exempted from the requirement of withholding tax on compensation: cSEAHa xxx xxx xxx (5) Compensation for services by a citizen or a resident of the Philippines for a foreign government or an international organization. Remuneration paid for services performed as an employee of a foreign government or an international organization is exempted. The exemption includes not only remuneration paid for services performed by ambassadors, ministers and other diplomatic officers and employees but also remuneration paid for services performed as consular or other officer or employee of a foreign government or as a non-diplomatic representative of such government." With the foregoing, it can be inferred that as an international organization, the Delegation of the European Commission in the Philippines is exempted from the obligation to withhold income tax payments to its Filipino staff/employees. Nevertheless, it bears noting that the Delegation's Filipino staff/employees are still required to file their income tax returns and pay the corresponding tax due on their salaries received from the Delegation pursuant to Revenue Memorandum Circular (RMC) No. 31-2013. TDcEaH This ruling is issued on the basis of the facts as represented. However, if upon investigation, it shall be disclosed 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.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue