ITAD Ruling No. 110-00

August 23, 2000 ITAD RULING NO. 110-00 Sec. 32 (B) (6) (c) RP-France, Art. 19 Quisumbing Fernando & Javellana Law Offices Lajave Center, R. Alvero cor. E. Abada Sts., Loyola Heights, Quezon City Attention: Mr . Emmanuel Q . Fernando and Mr . Enrico Q . Fernando Gentlemen : This refers to your letter dated January 19, 2000, seeking clarification on the taxability of the income from pension of your client, Mr. Serge M. Laumond, a French national residing in the Philippines. It is represented that Mr. Laumond is a French national who has been granted permanent residency status in the Philippines pursuant to Executive Order No. 1037 (Philippine Retirement Authority Law); that Mr. Laumond is a holder of a Special Resident Retiree's Visa (SRRV) issued by the Philippine Retirement Authority of the Office of the President; that he is not engaged in any trade or business nor in the exercise of any profession in the Philippines; and that his only source of income is the pension from the French government. In reply, please be informed that Sec. 32(B)(6)(c) of the National Internal Revenue Code of 1997 (Tax Code of 1997) provides: "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 (6) Retirement Benefits, Pensions, Gratuities, etc . xxx xxx xxx (c) The provisions of any existing law to the contrary notwithstanding, social security benefits, retirement gratuities, pensions and other similar benefits received by resident or nonresident citizens of the Philippines or aliens who come to reside permanently in the Philippines from foreign government agencies and other institutions, private or public. " (Emphasis supplied) THDIaC Furthermore, Article 19 (2) of the RP-France Tax Treaty states: "Article 19 GOVERNMENT SERVICE xxx xxx xxx 2. Any pension paid by, or out of funds created by, a Contracting State or one of its political subdivisions or local authorities or by a statutory body thereof to any individual in respect of services rendered to that State or subdivision or local authority or statutory body shall be taxable only in that State." (Emphasis supplied) It is clear that the Tax Code of 1997 exempts from income tax the pensions received from foreign governments by aliens permanently residing in the Philippines. Likewise, the above-quoted provision of RP-France Tax Treaty declares that pension paid by French Government to any individual in respect of services rendered to the Government of the French Republic shall be taxable only in that State. Thus, the pensions transmitted to and received by Mr. Laumond from the French Government is taxable only in France. Accordingly, the pension of Mr. Serge M. Laumond from the French government is exempt from Philippine income tax and he is not required to file income tax return in the Philippines in accordance with Section 51(A)(2)(d) of the Tax Code of 1997. This ruling is being issued on the basis of the foregoing representations. However, if upon investigation, it shall be disclosed or discovered that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) DAKILA B. FONACIER Commissioner of Internal Revenue