February 16, 2005

BIR RULING [DA-056-05]

Punongbayan & Araullo

20th Floor, Tower 1
The Enterprise Center
6766 Ayala Avenue
Makati City

Attention: Ms. Marivic C. Españo

Tax Partner

Gentlemen :

This refers to your letters dated January 24, 2005 and February 10, 2003
stating that PunongBayan & Araullo (P&A) is a general professional partnership duly
registered with the Securities and Exchange Commission (SEC); that it is engaged,
among others, in the practice of taxation; and that in the course of such tax practice, it
has encountered an issue as to whether or not the aggregate period of more than one
hundred eighty (180) days provided under Section 25(A)(1) of the Tax Code of 1997
is required in order that an alien individual may be considered as engaged in trade or
business in the Philippines, should be applied not on a yearly basis.

Based on the foregoing representations, you now request for clarification on

the interpretation of Section 25(A)(1) of the Tax Code of 1997 relative to the 180-day
period in determining whether an alien individual will be classified as a non-resident
alien engaged in trade or business subject to income tax at the graduated rates of 5%
and 32%.

In reply thereto, please be informed that Section 25(A)(1) of the Tax Code of
1997 provides that a non-resident alien individual engaged in trade or business in the
Philippines shall be subject to an income tax in the same manner as an individual
citizen and a resident alien individual, on taxable income received from all sources
within the Philippines. A non-resident alien individual who shall come to the
Philippines and stay therein for an aggregate period of more than one hundred eighty

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 (180) days during any calendar year shall be deemed a "non-resident alien doing
business in the Philippines, Section 22(G) of the said Code notwithstanding.
(emphasis supplied) ITScAE

It is significant to note that the law uses the phrase "any calendar year" for
purposes of computing the 180 day period within which a non-resident alien
individual may be considered as engaged in trade or business in the Philippines and
therefore subject to the tax at the graduated rates of 5% to 32%. Thus, in applying the
aforesaid provision, all the months in a calendar year covered by the period of
assignment of the non-resident alien individual should be considered in evaluating if
he exceeded the 180 day period in any calendar year. Accordingly, when an
expatriate's stay in the Philippines exceeds the 180-day period during any calendar
year he becomes a non-resident alien doing business in the Philippines for the entire
duration of his Philippine assignment.

SUCH BEING THE CASE, this Office holds that the phrase "any calendar
year" in the aforesaid Section of the Tax Code should be interpreted to mean that
when an expatriate stays in the Philippines for more than 180 days in any calendar
year, he would already be taxed at the graduated rates of 5% to 32% not only during
the year that he exceeds the 180-day period, but also during the other years of
assignment, even if such stay did not exceed 180 days.

Very truly yours,

(SGD.) JOSE MARIO C. BUÑAG

Deputy Commissioner
Legal & Inspection Group
Bureau of Internal Revenue

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