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rr 1-79

SECTION 1. Scope. These amended regulations shall govern the manner of taxation of nonresident citizens as provided for under Section 21 of the Tax Code, as amended, and shall be known as
Revenue Regulations No. 1-79.
In reply, please be informed that KAI's Filipino employees who were sent to work in HongKong may
either be permanent or contractual. They are considered permanent if they leave the Philippines to
reside abroad on a more or less permanent basis, (whether or not his stay abroad is less than 183 days);
and contractual if they leave 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, which means staying abroad for not
less than 183 days during the taxable year. (Sec. 2, Revenue Regulations No. 1-79 dated January 8,
1979; BIR Ruling No. 043-89) Permanent or contractual employees (who stayed abroad for not less
than 183 days during the taxable year) shall be considered non-resident citizen with respect to the
income derived in HongKong, which means that such income shall be subject to the preferential tax
rate on the adjusted gross income pursuant to Section 21(b) of the Tax Code. Likewise, Filipinos who
are already residents of HongKong when hired by KAI shall be considered non-resident citizens subject
to Philippine income tax under Section 21(b) of the Tax Code and to the withholding tax on
compensation of a citizen for services performed outside the Philippines under Section 7.11 of Revenue
Regulations No. 6-82. (BIR Ruling No. 503-88) Contractual Filipino employees of KAI whose stay
abroad is less than 183 days shall be taxable as resident subject to the graduated income tax rate under
Section 21(a) of the Tax Code.
In reply, please be informed that Section 2 of Revenue Regulations No. 1-79 dated January 8, 1979
implementing Section 21(b) of the Tax Code, as amended define permanent employee as compared to
that of a contract worker, as follows:
In view thereof, this Office is of the opinion as it hereby holds that your employees who are deployed
in Beijing to assume various positions at the Palace Hotel under and by virtue of a joint venture
agreement with the owners thereof shall be considered contractual employees. Accordingly, in order to
be considered as a non-resident citizen subject to the preferential tax rate prescribed under Section
21(b) of the Tax Code, they shall be required to show proof of physical presence abroad for a period of
at least 183 days reckoned from the date he actually departed from the Philippines as required under
Revenue Regulations No. 1-79. cdtech
In reply thereto, I have the honor to inform you that your question is answered in the negative. Section
2 of Revenue Regulations No. 1-79 amplifying Section 20(c)(1) and (2) of the Tax Code defines the
term "non-resident citizen" as 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:
In view thereof, and considering that your wife is travelling on a tourist visa and that she does not have
any permanent residence abroad, this Office is of the opinion as it hereby holds that your wife is not a
non-resident citizen within the contemplation of Section 20(e)(1) and (2) of the Tax Code as
implemented by Revenue Regulations No. 1-79. cdtech
3.
Businessmen and professional practitioners staying abroad as holders of immigrant visas are
considered non-resident citizens, even if such stay is less than 183 days. The requirement of having
stayed outside the Philippines for not less than 183 days during a taxable year applies only in the case
of a contract worker in order to be considered physically present abroad most of the time during the
taxable year [Sec. 2(c), Revenue Regulations No. 1-79].
However, pursuant to Revenue Regulations No. 8-76 as amended implementing Section 77 of the Tax
Code, the Payor corporation is required to render an information return (BIR Form 1701B) on the

remittances made in a calendar year to non-resident Filipino citizens of dividends in the aggregate
amount of P1,800.00 or more. Since said dividends constitute income derived from sources within the
Philippines, (Sec. 37 (a)(2)(A), Tax Code), the Filipino recipients thereof who are residing abroad must
file income tax returns on BIR Form No. 1701 or 1701A, as the case may be, declaring therein said
dividends. They shall also filed separate income tax returns on BIR Form No. 1701 covering income
derived from foreign sources. (Sec. 4, Revenue Regulations No. 1-79 dated January 8, 1979).
Accordingly, you are considered a non-resident citizen since your services were rendered abroad for
more than 183 days and, therefore, exempt from payment of Philippine income tax. In this connection,
the phrase "most of the time" which is used in determining when a citizen's physical presence abroad
will qualify him as non-resident, shall mean that the said citizen shall have stayed abroad for at least
183 days in a taxable year [Section 2 (c), Revenue Regulations No. 1-79]. ASHICc
Moreover, beginning February 13, 2006 up to the present, you may still be considered a non-resident
citizen if your services were rendered abroad for more than 183 days in each of the years 2006 and
2007 and, therefore, exempt from payment of Philippine income tax. In this connection, the phrase
"most of the time" which is used in determining when a citizen's physical presence abroad will qualify
him as non-resident, shall mean that the said citizen shall have stayed abroad for at least 183 days in a
taxable year [Section 2 (C), Revenue Regulations No. 1-79].
Thus, for purposes of exemption from income tax, a citizen must be deriving foreign-sourced income
for being a non-resident citizen under Section 23(C) of the Tax Code of 1997 or for being an overseas
contract worker (OCW) under Section 23(B) of the same Code. Accordingly, the issue on whether or
not you are a non-resident citizen depends on whether your services are rendered abroad for more than
183 days in which case said services are exempt from Philippine income tax. In this connection, the
phrase "most of the time" which is used in determining when a citizen's physical presence abroad will
qualify him as non-resident, shall mean that the said citizen shall have stayed abroad for at least 183
days in a taxable year (Section 2(c), Revenue Regulations No. 1-79). aAHTDS
Thus, for purposes of exemption from income tax, a citizen must be deriving foreign-sourced income
for being a non-resident citizen under Section 23(C) of the Tax Code of 1997 or for being an overseas
contract worker (OCW) under Section 23(B) of the same Code. You may be considered a non-resident
citizen since your services are rendered abroad for more than 183 days and are therefore exempt from
payment of Philippine income tax. In this connection, the phrase "most of the time" which is used in
determining when a citizen's physical presence abroad will qualify him as non-resident, shall mean that
the said citizen shall have stayed abroad for at least 183 days in a taxable year [Section 2(c), Revenue
Regulations No. 1-79].