BIR Ruling No. 305-2016

REPUBLICOFTHE PHILIPPINES

DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE

Quezon City

BIR Ruling No.116-12 Sections 22(E(3&23(Bof the 1997 Tax Code RR No.1-79

305-2016

6-28-2016

Department of Social Welfare and Development IBP Road, Batasan Pambansa Complex Constitution Hills, Quezon City HON.ALICIA R.BALA Undersecretary

Dear Usec. Bala.

Exemption on your salaries received during the period of your secondment, from ASEAN Secretariat as Deputy Secretary General in JakartaIndonesia. September 8.2012 to September 7.2015.in the Association of Southeast Asian Nations This refers to your letter dated October 5.2015 requesting for Certificate of Tax

secondment was Jakarta, Indonesia. of the Department of Social Welfare and Development (DSWD when she was without pay in DSWD during the said period; that the remunerations and other benefits due to Usec. Bala were shouldered by the ASEAN Secretariat as provided in the ASEAN Letter of Appointment dated August 13.2012;and that based on the ASEAN Letter of Appointment, the official duty station of Usec. Bala during the period of appointed for the post of Deputy Secretary General for the ASEAN Secretariatthat based on the Memorandum of Agreement dated August 31,2012 executed between the DSWD and the ASEAN Secretariat.Usec.Bala continued to be an employee of DSWD during her secondment in the ASEAN Secretariat but she was considered on leave Based on the documents submitted.it is shown that Usec. Bala is an employec

In reply thereto,Section 22Eof the NIRC provides

Title: "Sec. 22. Definitions.-- When used in this

XXX XXX XXX

(E) The term 'nonresident citizen'means.

presence abroad with a definite intention to reside therein. the satisfaction of the Commissioner the fact of his phvsical A citizen of the Philippines who establishes to

as an immigrant or for employment on a permanent basis. Philippines during the taxable year to reside abroad, either (2 A citizen of the Philippines who leaves the

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Undersecretary Alicia R.BalaDSWD #305-201 6 6-28-2016

Page 2 of 3

3)A citizen of the Philippines who works and

requires him to be physically present abroad most of the time derives income from abroad and whose employment thereat

during the taxable year.

as nonresident citizen and who arrives in the Philippines at 4A citizen who has been previously considered

any time during the taxable year to reside permanently in the Philippines shall likewise be treated as a nonresident citizen for the taxable year in which he arrives in the Philippines with respect to his income derived from sources abroad until the date of his arrival in the Philippines.

xxxxxxxxxEmphasis supplied

Revenue Regulations No.01-79 dated January 8, 1979 enumerated those who are Prior to the foregoing provision defining a non-resident citizen, Section 2 of

considered as non-resident citizens, to wit:

"SEC. 2. Who are considered as non-resident citizens. -

Internal Revenue the fact of his physical presence abroad establishes to the satisfaction of the Commissioner of The term "non-resident citizen" means one who

with the definite intention to reside therein and shall include any Filipino who leaves the country during the taxable year

as:

to reside abroad as an immigrant for which a foreign visa as such has been secured. (a Immigrant - one who leaves the Philippines

less permanent basis. Philippines to reside abroadfor emplovment on a more or bPermanent emplovee-one who leaves the

(c) Contract worker- one who leaves the Philippines on account of a contract of employment which is renewed from time to time within or during the taxable vear

be considered physically present abroad most of the time during the taxable year,a contract worker must have been outside the Philippines for not less than 183 days during such taxable year. under such circumstances as to reguire him to be physically present abroad most of the time during the taxable vear. To

contract worker.Stated otherwise, to be a non-resident citizen, one must leave on account of a contract of employment under such circumstances that require him to be physically present abroad most of the time.The phrase"most of the time"was construed to mean a period more than 183 days during the taxable year.This is aligned with the present provision of the Tax Code of 1997 that describes the non-resident citizen as a thereat requires him to be physically present abroad most of the time".(BIR Ruling No. Philippine citizen who "works and derives income from abroad and whose employment 116-12 dated February 22,2012 Apparently,the current Section 22(E(3was derived from the above-defined

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#305-2016 6-28-2016 Undersecretary Alicia R. BalaDSWD

Page 3 of 3

Even though the salary of Usec. Bala was shouldered by the Receiving Agency

(ASEAN Secretariat her assignment/appointment was only on secondment status

temporary thru Memorandum of Agreement between the Mother Agency (DSWD

and the Receiving Agency. Further. it was stated in the Memorandum of Agreement

that while on secondment, the continuity of her employment service shall not be

affected and the mother agency shall continue to pay her government mandatory

contributions(GSIS premiums,Pag-IBIG Fund.PHILHEALTH for the duration of the

secondment.Thus,Usec.Bala remained to be an employee of the DSWD during the

period of secondment and, at the time,she did not have any intention to reside at Jakarta.

indonesia either as immigrant or on a permanent basis to make her a non-resident

citizen under Section 22E of the Tax Code of 1997,as amended.

In view of the foregoing and based on the circumstances of Usec. Bala's

employment,she cannot be qualified as "non-resident citizen"under Section 22(E3

of the Tax Code of 1997.

AccordinglyUsec. Bala is still considered a resident citizen during the period

of her secondment in the ASEAN Secretariat.in which case.she is taxable on all income

derived from within and without the Philippines, including her salaries received from ASEAN Secretariat during the period of secondment from September 8, 2012 to

September 7.2015.Hence,Usec. Bala must file income tax returns for said periods and

pay the corresponding tax due thereon.

Please be guided accordingly.

Very truly yours,

KIM S.JACINTO-HENARES

K- Commissioner of Internal Revenue 042477 JUN 27 2016