ITAD Ruling No. 085-05

August 23, 2005 ITAD RULING NO. 085-05 Article 20, Philippines-Germany tax treaty Embassy of the Federal Republic of Germany 6th Floor, PS Bank Center, 777 Paseo de Roxas, Makati City Attention: Mr . Roland Grafe Counsellor/Deputy Head of Mission Gentlemen : This refers to your letter dated June 21, 2004 indorsed to this Office on September 22, 2004 by Alberto R. Bomediano, Jr., Assistant Chief of Legal Division, Revenue Region No. 8, Makati City and received by this Office on September 23, 2004, requesting confirmation of your opinion that the salaries and/or other remunerations received by teachers engaged to teach in Deutsche Schule Manila (DSM) namely: Ms. Ute Weeren, Ms. Ulrike Koll, Ms Nicole Huber, Mr. Christoph Grandt, Mr. Dirk Breidenbach and Ms. Monika Hammerle, for a period not exceeding two (2) years are exempt from Philippine taxation pursuant to Article 20 of the Philippines-Germany tax treaty. It is represented that DSM is the German component of the European International School with principal address at No. 75 Swaziland St., Better Living Subd., Paraaque City; that the above-named teachers are, at present or immediately before, were residents of the Federal Republic of Germany as evidenced by the certification letter issued by Mr. Henning Hansen, Third Secretary of the Press and Cultural Affairs of the Embassy of the Federal Republic of Germany in Manila; that DSM entered into Contract of Local Employment for a Limited Period of Time with each of the above-named teachers for a period not exceeding two years, as follows: Name Duration of Contract 1. Ute Weeren September 1, 2004-July 31, 2006 2. Ulrike Koll September 1, 2004-July 31, 2006 3. Nicole Huber September 1, 2004-July 31, 2006 4. Christoph Grandt September 1, 2004-August 11, 2006 5. Dirk Breidenbach September 1, 2004-August 11, 2006 6. Monika Hammerle September 1, 2004-August 31, 2005 In reply, please be informed that Article 20 of the Philippines-Germany tax treaty provides as follows: "Article 20 "TEACHERS AND RESEARCHERS "1. Remuneration which a professor or teacher, who is or immediately before was a resident of a Contracting State and who visits the other Contracting State for a period not exceeding two years for the purpose of carrying out advanced study or research or for teaching at a university, college, school or other educational institution, receives for such work shall not be taxed in that Contracting State. CTHDcS "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." Based on the aforequoted provision, it is clear that the remuneration paid to the teachers, who are or immediately before, were residents of Germany and who stay in the Philippines for the purpose of teaching for a period not exceeding two years shall not be subject to Philippine income tax. In view thereof, this Office is of the opinion and so holds that the subject remuneration of the above-named German teachers for teaching in DSM for a period not exceeding two (2) years shall not be subject to Philippine income tax. This ruling is issued on the basis of the facts as represented. However, if upon investigation it shall be disclosed that the facts are different, then this ruling shall be without force and effect insofar as the herein parties are concerned. Very truly yours, (SGD.) JOSE MARIO C. BUAG OIC-Commissioner of Internal Revenue