Presidential Decree No. 323 amending Sections 21 and 51 of the National Internal Revenue Code, as amended

November 26, 1973 REVENUE REGULATIONS NO. 09-73 SUBJECT : Presidential Decree No. 323 amending Sections 21 and 51 of the National Internal Revenue Code, as amended TO : All Internal Revenue Officers and Others Concerned Pursuant to Paragraph 3 of Presidential Decree No. 323 dated October 26, 1973, amending Sections 21 and 51 of the National Internal Revenue Code, as amended, the following regulations are hereby promulgated and shall be known as REVENUE REGULATIONS NO. 9-73. SECTION 1. Scope . These Regulations shall cover the income tax on non-resident Filipino citizens. SECTION 2. Definition . For purposes of these Regulations, a non-resident citizen is "one who establishes to the satisfaction of the Commissioner the fact of his physical presence abroad for an uninterrupted period which includes an entire taxable year." The phrase "uninterrupted period" should not be interpreted literally as to negate the continuity of residence abroad. If the reason for the physical presence abroad is established such as employment on a more or less regular tenure, such physical presence abroad for the taxable year is not deemed interrupted by reason of visits or travels to the Philippines, no matter how often made, as to negate the citizen's status as a non-resident citizen. SECTION 3. Requirements for filing and paying . A. Who must file . Every non-resident citizen who is at least 18 years of age must file an income tax return regardless of whether or not he derived income from abroad. Where the non-resident citizen, though less than 18 years of age derived income from abroad, an income tax return must nevertheless be filed by the parent or guardian. B. Forms to Use 1. BIR Form 1701C with respect to income derived from sources without the Philippines; 2. BIR Form 1701 or BIR Form 1701A with respect to income derived from sources within the Philippines, if said income amounts to P1,800.00 or more; 3. BIR Form 1701A if the non-resident Filipino did not derive income from sources abroad but he either derived income of less than P1,800.00 or did not derive any income at all from sources within the Philippines but falls under any of the following categories: (a) Is an official or employee of the government or has a contract with the Government of the Republic of the Philippines, or any of its agencies or instrumentalities, including government-owned or controlled corporations, regardless of the nature of his appointment or duration of his employment; (b) Is a professional; (c) Is a registered or beneficial owner or mortgage of any real property; (d) Is a registered or beneficial owner, or mortgagee of any motor vehicle; (e) Is a registered or beneficial owner, or mortgagee of any share of stock or security of a corporation, or any interest in a firm or partnership; (f) Has travelled abroad, except children below eighteen years of age; (g) Has filed a certificate of candidacy for any public office except barrio officials and municipal councilors; (h) Is engaged in trade or commerce. 4. When husband and wife are both non-resident citizens, only one return containing their consolidated foreign income is required to be filed on BIR Form 1701C. However, if aside from their foreign income either or both the spouses also derive income from Philippine sources, two separate returns should be filed: One return on BIR Form 1701C covering the income derived from foreign sources and another return on BIR Form 1701 or 1701A as the case may be covering the income derived from sources within the Philippines. C. When and where to file and pay . The return must be filed, and the tax due, if any, must be paid on or before April 15th following the year for which the return is being filed with the Philippine Embassy or Office of the Consulate General nearest to his place of residence or direct to the Commissioner of Internal Revenue, Finance Building, Manila, Philippines. If the return and payment, if any, are sent by mail, the same should be mailed on such a date as to reach the Philippine Embassy, Philippine Consulate General or the Commissioner of Internal Revenue on or before April 15. The payment should be made in the form of an international money order, bank draft or manager's check payable to the Commissioner of Internal Revenue. When the tax due is in excess of two hundred dollars (U.S. $200.00), the non-resident citizen may elect to pay the tax in two equal installments in which case, the first installment shall be paid at the time the return is filed and the second installment, on or before the fifteenth day of July following the close of the calendar year. If any installment is not paid on or before the date fixed for its payment, the whole amount of the tax unpaid becomes due and payable together with the delinquency penalties. D. Attachments to the return . Copies of all national income tax returns filed with foreign governments as well as evidences of payment shall be attached to the Philippine income tax return to be filed by the non-resident citizen. aisa dc SECTION 4. Computation of tax . A. On income derived from all sources outside the Philippines . 1. What to include as gross income . The gross income of a non-resident citizen derived from sources outside the Philippines includes all income enumerated under Section 29 of the National Internal Revenue Code, whether or not such income is exempted from income tax in the foreign country where it was derived. If the income in foreign currency is other than the US dollar, it shall first be converted into US dollar at the average annual rate of exchange of the foreign currency and the U.S. dollar. 2. Rate of tax . Beginning with the taxable year 1973, there shall be imposed on the adjusted gross income of non-resident citizens a tax computed as follows: On the amount not exceeding $6,000 1% On the amount exceeding $6,000 but not exceeding $20,000 $60.00 plus 2% of excess over $6,000.00 On the amount exceeding $20,000 $340.00 plus 3% of excess over $20,000.00 3. Computation of Adjusted Gross Income . The adjusted gross income is determined or arrived at by deducting from the gross income the following: a. Personal exemption of $2,000 if the non-resident citizen is single and $4,000 if married or head of a family; b. The total amount of the national income tax paid to the foreign country of his residence and/or to the government of the country where the income was derived. 4. Head of Family . The term "head of family" is defined as "an unmarried man or woman with one or both parents, or one or more brothers or sisters, or one or more legitimate, recognized natural, or adopted children living with and dependent upon him or her for their chief support where such brothers, sisters, or children are not more than twenty-one years of age, unmarried and not gainfully employed or where such children are incapable of self-support because they are mentally and physically defective. 5. Computation of tax . The computation of the tax due from a non-resident citizen on income derived abroad is illustrated as follows: Mr. Juan de la Cruz, Filipino, married to Maria, with a dependent son, Jose, and a resident of Millway, Hometown NY 14202. For U.S. Federal Income Tax purposes, he filed a return containing the following data: Income : Wage, Salaries, Tips, Others $7,814.65 Dividends $462.50 less exclusion $180.00 282.50 Interest Income 110.17 Income other than wages (Wife's prize in Photo Contest) 200.00 TOTAL GROSS INCOME $8,307.22 LESS: Adjustment to income (moving expenses) 60.00 Adjusted Gross Income $8,247.22 TAX DUE PER IRS TABLES $748.00 Tax payments and credits Total Federal income tax withheld $484.30 Other payments (gasoline tax etc.) $32.67 Total payments and credits $516.97 BALANCE DUE IRS $(231.03) ====== For Philippine income tax purposes, his income shall be computed as follows: Gross Income $8,307.22 ADD: Excluded income taxable under Philippine Income Tax Law 180.00 Total Gross Income $8,487.22 LESS: (a) Personal Exemption as married $4,000.00 (b) Foreign National Income Tax paid (Attach copy of Federal Income Tax Return and evidence of payment $ 748.00 Total Deductions (add (a) & (b) $4,748.00 ADJUSTED GROSS INCOME SUBJECT TO TAX $3,739.22 Tax Due: Adjusted Gross Income $3,739.22 At 1% rate (not over $6,000.00) x .01. Amount payable $37.39 ======= B. On income derived from sources within the Philippines . The tax due on income derived by a non-resident citizen from sources within the Philippines shall be computed in the same manner as the tax payable by resident citizens and resident aliens. SECTION 5. Effectivity . These Regulations take effect immediately and shall apply to income earned beginning January 1, 1973. CESAR VIRATA Secretary of Finance Recommended by: MISAEL P. VERA Commissioner of Internal Revenue