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April 17, 1998

SUBJECT : Regulations Governing the Taxation of Non-resident Citizens

TO : All Internal Revenue Officers and Others Concerned

Pursuant to the provision of Section 326 in relation to Section 4 of the National Internal Revenue Code of 1977, as amended, the following regulations
revising Revenue Regulations No. 9-73 to implement the latest amendments to Section 20 of the same Code by P.D. No. 1457 are hereby promulgated.

SECTION 1. Scope. — These amended regulations shall govern the manner of taxation of non-resident citizens as provided for under Section 21 of
the Tax Code, as amended, and shall be known as Revenue Regulations No. 1-79.

SECTION 2. Who are considered as nonresident citizens. —

The term "non-resident citizen" means one who establishes to the satisfaction of the Commissioner of Internal Revenue the fact of his physical presence
abroad with the definite intention to reside therein and shall include any Filipino who leaves the country during the taxable year as:

(a) Immigrant — one who leaves the Philippines to reside abroad as an immigrant for which a foreign visa as such has been secured.
(b) Permanent employee — one who leaves the Philippines to reside abroad for employment on a more or less permanent basis.
(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 year under such circumstances as to require him to be physically present abroad most of the time during the taxable
year. To 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. aisa dc

Any such Filipino shall be considered a non-resident citizen for such taxable year with respect to the income he derived from foreign sources from the
date he actually departed from the Philippines.

A Filipino citizen who has been previously considered as a non-resident citizen and who arrives in the Philippines at any time during the taxable year to
reside therein permanently shall also be considered a non-resident citizen for the taxable year in which he arrived in the Philippines with respect to his
income derived from sources abroad until the date of his arrival.

SECTION 3. Proof of intention. — A Filipino citizen who leaves the Philippines to reside abroad either as an immigrant or for permanent employment
or a contract worker, shall submit to the Commissioner of Internal Revenue proof of his intention of leaving the Philippines to reside permanently abroad.
A returning non-resident citizen, on the other hand, must present proof of his intention to return to and reside permanently in the Philippines. Such proof
of intention shall be attached to his income tax return (BIR Form No. 1701C) and may consist of the following:
(a) In the case of an immigrant, photostat or xerox copy of his foreign visa.
(b) In the case of one leaving for permanent employment abroad, a certificate from his employer showing the nature and duration of his
(c) In the case of a contract worker —
(1) Certificate of the employer; or
(2) Copy of the contract of employment; or
(3) Other documentary evidence.
(d) In the case of a returning non-resident citizen —
(1) Xerox copy of his passport bearing the stamp of Philippine immigration authorities showing that he is a returning resident as
distinguished from a mere Balikbayan.
(2) Other documentary evidence.

SECTION 4. Manner of filing returns. — Every non-resident citizen must file an income tax return covering all his income earned abroad on BIR Form
No. 1701C. When husband and wife are both non-resident citizens, only one return containing their consolidated income is required to be filed on BIR
Form No. 1701C.

If aside from the foreign income, the non-resident citizen also derives income from Philippine sources, two separate returns should be filed, one on BIR
Form No. 1701C covering the income derived from foreign sources and the other on BIR Form No. 1701 or 1701A, as the case may be, covering the
income from sources within the Philippines. However, if the Philippine income is derived solely from salaries, wages, remunerations or other similar
compensation for services rendered and such gross income does not exceed P2,000, if the taxpayer is single, or P3,333.33, if married or a head of the
family, the non-resident citizen is exempt from filing an income tax return with respect to such income.

The income tax return of non-resident citizen covering his taxable income earned abroad shall be accompanied by a copy of the income tax return filed
with the national government of the foreign country of his residence as well as the evidences of tax payment.

SECTION 5. Computation of income and 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 is in foreign currency other than US dollars, it shall first be converted into US dollars at the average annual rate of exchange
of the foreign currency and the US dollar for the year in which the income was earned.
2. Rate of tax. — Beginning with the taxable year 1978, there shall be imposed on the adjusted gross income of non-resident citizen 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
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over $6,000.
On the amount exceeding
$20,000 $340.00 plus 3% of excess
over $20,000.

3. Computation of Adjusted Gross Income. — The adjusted gross income is arrived at by deducting from the gross income the following:
a. Personal exemption of $2,000 if the non-resident citizen is single or a married person legally separated from his or her spouse, or
$4,000 if married or head of a family;
b. The total amount of the national income tax actually paid to the national government of the foreign country of his residence.

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 or 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, 35 years old, Filipino, married to Maria, with a dependent son, Jose and a resident of Los Angeles, California.

For U.S. Federal Income Tax purposes, he filed a joint return containing the following data and claimed the optional standard deductions and used the
optional tax tablets:
Wage, Salaries, Tips, Others $7,814.65
Dividends received from qualified U.S.
domestic corporation — $482.50 less
exclusion $200.00 282.50
Interest Income on savings deposit 110.17
Income other than wages (Wife's prize
in photo contest) 200.00
LESS: Adjustment to income (moving
expenses) 60.00
Adjusted Gross Income $8,347.32
Tax payments and credits
Total Federal income tax
withheld $484.30
Other payments (gasoline
tax, etc.) 32.67
Total payments and credits $516.97
For Philippine income tax purposes, his income shall be computed as follows:
Gross Income $8,407.32
ADD: Excluded dividend income taxable
under Philippine Income Tax Law 200.00
Total Gross Income $8,607.32
(a) Personal Exemption as
married $4,000
(b) Foreign National Income
Tax paid (Attach copy
of Federal Income Tax
Return and evidence
of payment) 325
Total Deductions [add (a) & (b)] 4,325.00
Tax Due:
Adjusted Gross Income $4,282.32
At 1% rate (not over $6,000.00) x .01
Amount payable $42.82

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
income tax payable by resident citizens and resident aliens.

SECTION 6. When and where to file. — The return must be filed, and the tax due, if any, must be paid on or before April 15 following the year for
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which the return is being filed with the Philippine Embassy or Office of the Consulate General nearest to the taxpayer's place of residence or direct to the
Commissioner of Internal Revenue, BIR Bldg., Diliman, Quezon City, 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.

If the return is filed and payment of the tax made in the Philippines by or for the non-resident citizen, the tax may be paid in Philippine currency, the
dollar amount of the tax to be converted into pesos at the rate of exchange prescribed by Revenue Memorandum Circular No. 21-78 for internal revenue
tax purposes.

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.

SECTION 7. Repealing Clause. — These regulations supersede Revenue Regulations No. 9-73 dated November 26, 1973. All existing rules,
regulations, administrative orders and general circulars or portion thereof, which are inconsistent herewith are hereby repealed, amended or modified

SECTION 8. Effectivity. — These regulations shall take effect immediately and shall apply to income earned beginning January 1, 1978.

Minister of Finance

Recommending Approval:
Acting Commissioner

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