Taxation of compensation income of employees of foreign governments and international organizations

(Last of 3 parts)

To clarify this issue, the Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular (RMC) 31-2013 dated April 12, 2013 providing guidelines on the taxation of compensation income of employees of foreign government and/or international organization based in the Philippines.  Under RMC No. 31-2013, the tax treatment of the compensation income of employees of foreign governments and international organizations based in the Philippines shall be as follows:

As seen above, exemption from withholding tax on compensation does not necessarily make the subject compensation exempt from Philippine income tax.  In the case of Philippine nationals employed by foreign governments and international organizations based in the Philippines, their compensation income remain subject to Philippine income tax, unless specifically exempt from income tax under the terms and provisions of international agreements or under laws granting privileges to employees of international organizations.  However, such Philippine nationals claiming exemption from income tax shall file an application for confirmation of tax exemption with the International Tax Affairs Division (ITAD) of the BIR. 

Sheryl Mae T. Amarille-Vegilla is a Manager  from the Tax Group of Manabat Sanagustin & Co. (MS&Co.), the Philippine member firm of KPMG International.

This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity.

The view and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International or MS&Co. For comments or inquiries, please email [email protected] or [email protected].