ITAD Ruling No. 129-04

November 10, 2004 ITAD RULING NO. 129-04 NIRC, Sec. 109 VAT Ruling No. 142-90 Filipinas Eye Center Foundation, Inc . Philippine General Hospital Taft Avenue, Manila Attention: Marita V.T. Reyes, MD President Gentlemen : This refers to your letter dated August 23, 2004 (with Reference No.: 2004-222) requesting for a ruling on the taxability of the salaries and emoluments to be received by Spanish professionals and experts sent by Spain pursuant to the Statement of the Fourth Philippines-Spain Joint Commission for Cooperation (2001-2003). It is represented that the Statement of the Fourth Philippines-Spain Joint Commission for Cooperation was signed in Madrid, Spain on July 3, 2001 for the implementation of the Fourth Joint Commission for Cooperation between the Governments of the Philippines and Spain; that pursuant to the said Statement, the National Eye Referral Center of the Philippine General Hospital in the Philippines was established designating Filipinas Eye Center Foundation, Inc. (FECFI), a non-governmental organization, as its implementing agency; and that for the execution of the programs and projects of the National Eye Referral Center, Spanish professionals and experts are sent by the Government of Spain. In this regard, your Office now requests for confirmation that the salaries and emoluments received by Spanish professionals and experts are exempt from Philippine income tax pursuant to the tax privileges and immunities accorded under the General Friendship and Cooperation Treaty dated June 30, 2000 and the Basic Agreement of Technical Cooperation between the Government of Spain and the Government of the Republic of the Philippines signed and entered into on September 20, 1974. EcDATH In reply, please be informed that Article VIII paragraph 2 of the aforementioned Basic Agreement of Technical Cooperation, as recognized under the Statement of the Fourth Philippines-Spain Joint Commission for Cooperation, provides as follows: " Article VIII "In the execution of programs and projects envisaged in the Present Agreement and in Supplementary Agreements derived from the same, the following rules shall be observed: "xxx xxx xxx" 2. The salaries and other emoluments received by the technicians, experts or researchers sent by one of the High Contracting Parties to the territory of the Other, for the execution of programs and projects, shall not be subject to payment of income taxes in said territory. "xxx xxx xxx" Based on the afore-quoted provisions, salaries and emoluments received by technicians, experts and researchers sent by the Government of Spain to the Philippines for the execution of programs and projects supra shall be exempt from the payment of income taxes. Such being the case, and considering that the Spanish professionals and experts are sent by the Government of Spain for the purpose of carrying out programs and projects of the National Eye Referral Center in the Philippines, a bilateral project of Spain and the Philippines under the Fourth Joint Commission, this Office is of the opinion and so holds that the income received by said professionals and experts shall be exempt from Philippine income tax imposed under Sections 24 and 25 of the Tax Code of 1997. (VAT Ruling No. 142-90 dated May 23, 1990 and BIR Ruling No. ITAD-77-04 dated July 28, 2004) 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. cHAaEC Very truly yours, Commissioner of Internal Revenue By: (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service