ITAD Ruling No. 200-00

December 20, 2000 ITAD RULING NO. 200-00 Sec- 32 (B) (6) (c) RP-France, Art. 18 Quisumbing Fernando & Javellana Law Offices CVQ CENTER, 42 Esteban Abada St. Loyola Heights, Quezon City Attention: Atty . Emmanuel Q . Fernando Gentlemen : This refers to your letter dated September 7, 2000, requesting amendment of the issued BIR Ruling No. ITAD-110-00 dated August 23, 2000, exempting from Philippine income tax the pension received by your client, Mr. Serge Laumond, from the French Government. In your letter, you have mentioned that the pension of Mr. Serge Laumond is not derived exclusively from the French Government, contrary to your previous representation that Mr. Laumond's only source of income is the pension from the French Government. This clarification thus prompted you to request for an amended ruling as to likewise exempt from Philippine income tax the other pensions of Mr. Laumond. In reply, please be informed that the instant request to amend BIR Ruling No. ITAD-110-00 is hereby treated as a new application for relief from double taxation with respect to the other pension of your client. Thus, the issued ruling shall continue to govern the pension received by Mr. Laumond from the French Government in relation to his past services rendered thereto. HCSEcI In this light, your previous representations with respect to the above-mentioned ruling are hereby incorporated to include the new information as above-stated which will serve as a basis for this new application, to wit: 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; that aside from the pension he is receiving from the French government, he is also receiving pensions from the following : 1. CAVCIC Caisse d'allocation Vieillesse from Les Cadres de I'industrie et du Commerce (Retirement benefits for elder executives of industry and commerce) ; 2. Pension fund from Banque Nationale de Paris (a privatized institution which was previously public or government-owned) ; and 3. Groupe Vauban Retirement Benefits (for forty-two (42) years of service in banking institutions) (Emphasis supplied) In this regard, it is worthy to note Article 18 of the RP-France Tax Treaty which states: "Article 18 PENSIONS 1. Subject to the provisions of paragraph 2 of Article 19, pensions and other similar remuneration said to a resident of a Contracting State in consideration of past employment shall be taxable only in that State . However pensions paid out of pension plans of Philippine enterprises not registered under Philippine law may be taxed in the Philippines. (Emphasis supplied) 2. Notwithstanding the provisions of paragraph 1, social security pensions paid by a social security instrumentality of a Contracting State shall be taxable only in that Contracting State." AIDcTE The above-quoted provision of the RP-France Tax Treaty allows the country of residence to tax the pensions and other similar remuneration of the recipient. Since 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, he is considered as fiscal resident of the Philippines and therefore the Philippines may tax the pensions received by Mr. Laumond. However, 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) It is clear that the Tax Code of 1997 exempts from income tax the pensions received from foreign government agencies and other institutions, private or public by aliens permanently residing in the Philippines. Hence, although the Philippines may tax the pensions of Mr. Laumond under the RP-France Tax Treaty, the Tax Code of 1997 in turn expressly exempts from tax pension received by an alien permanently residing in the Philippines. Accordingly, the pensions of Mr. Serge M. Laumond from the aforementioned institutions are 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. cAaETS This ruling is issued on the basis of the foregoing representations. However, if upon investigation it will 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