Quarantine measures imposed by governments that limit travel and travel due to the Covid-19 pandemic are not only savings, but also tax rules.
According to foreign tax regulations and treaties, the number of days a taxpayer or his or her workers and agents remain in a country may be to determine tax status, tax exemption, or tax exemption.
According to our 1997 National Internal Revenue Code, as amended (Tax Code), a non-resident alien who remains in the Philippines for a total of 180 days in a calendar year must do business in the country and must pay taxes in the same way as an individual citizen and a resident alien.
In maximum tax treaties, the source of income generated through a resident of one treaty country in some other would sometimes not be subject to the source of income taxes in that country if that source of income is not attributable to a solid establishment (EP) in that country. A solid facility is sometimes a constant and with a degree of permanence, through which the activities of a company, including branch, office, warehouse or factory, are carried out in whole or in part, as well as a control seat. In some tax treaties, an EE would occur if the non-resident taxpayer plays with secure facilities or participates in structure activities for more than a certain period of time, such as 180 days in a calendar year, in that other country.
In addition, the source of income from the benefits of a foreign worker working in some other state would possibly not be taxable if he does not remain there for more than a safe period of time.
Aware of the travel restrictions caused by Covid-19, the Secretariat of the Organisation for Economic Cooperation and Development (OECD) published the OECD Secretariat’s research on tax treaties and the effect of the Covid crisis on 19 April 2020.
In addition, on 17 August, the Office of Internal Revenue (BIR) issued Circular Revenue Memorandum (RMC) 83-2020 to address the prestige of the taxpayer’s residence and the creation of MOU due to previous restrictions.
On replacing people’s prestige
Research by the OECD Secretariat indicates that a transitional dislocation of Americans due to restrictions caused by Covid-19 does not deserve to have fiscal implications.
RMC 83-2020 supplies that an herb user will not be deemed to provide in the Philippines for tax residency purposes for the era after the scheduled departure day. Therefore, the BIR considers that the era of restriction is a “force majeure” and does not take this into account to determine the tax residence of a user, however, this is subject to the condition that this user leaves the country as as soon as cases allow, such as when restrictions and / or quarantine measures are lifted.
On the creation of the solid establishment
However, the main workplace will be considered a strong status quo if it is frequently used to continue the advertising activities of the foreign company even after the Covid-19 crisis, and if that company has forced the individual to use that location to carry out those activities . . .
Pe of construction. The analysis of RMC 83-2020 and the OEC Secretariat imply that the duration of the transitional interruption of structural activities caused by the pandemic should be taken into account in determining the life of a site and whether a structure site constitutes an EE.
PE-dependent agent. An EE is also considered to occur if a resident of a treaty appoints a dependent agent in the other state, or when a user enters into contracts or plays a leading role in entering into contracts that are concluded without significant adjustments through the company.
The OECS Secretariat’s investigation provides that the activity of a worker or agent in some other state would not be widespread if he only worked from home in that state for a short period of time due to a case of force majeure or government protection.
According to RMC 83-2020, the IRB does not take into account the continued presence of an employee, associate or agent of a foreign company not resident in the Philippines due to restrictions to determine the prestige of the company on whose behalf the employee, spouse In other words, the prolonged stay of the employee, spouse or proxy is not taken into account in the account of the taxable presence of that company in the country , this is subject to the condition that the employee, spouse or proxy has left the country as soon as the cases permit.
About the resident of a company or the actual management position
The investigation of the OECD Secretariat indicates that a temporary replacement in the department of CEOs and other senior executives is an ordinary and transitory scenario due to the Covid-19 crisis and will not cause a replacement of the company’s department.
The effective control position is the position where key control and mandatory business decisions are made to carry out the activity of the entity as a total or in essence.
In fact, the Covid-19 restrictions have led to a number of problems, in addition to the determination of tax rules. It is a relief that the IRB and OECD have thought that these restrictions have no fiscal implications.
Euney Marie J. Mata-Perez is CPA-lawyer and managing wife of Mata-Perez, Tamayo
This article is for general data only and does not update the professional recommendation when the facts and cases warrant. If you have any questions or comments about this article, please email info@mtfcounsel. com or visit www. mtfcounsel. com.
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