Garrison v.

CA (1990)
Doctrine: An alien actually present in the Philippines who is not a mere transient or sojourner is
a resident of the Philippines for purposes of income tax.

Facts:
Petitioners, John Garrison, Frank Robertson, Robert Cathey, James Robertson, Felicitas de
Guzman and Edward McGurk (PETITIONERS) are US Citizens who entered the country
through the Philippine Immigration Act of 1940 and are employed in the US Naval Base in
Olongapo City. They earn no Philippine source income and it is also their intention to return to
the US as soon as their employment has ended.

The BIR sent notices to Petitioners stating that they did not file their Income Tax Returns (ITR)
for 1969. The BIR claimed that they were resident aliens and required them to file their returns.

Under then then Internal Revenue Code resident aliens may be taxed regardless of whether the
gross income was derived from Philippine sources.

Petitioners refused stating that they were not resident aliens but only special temporary visitors.
Hence, they were not required to file ITRs. They also claimed exemption by virtue of the RP-US
Military Bases Agreement.

Under Military Bases Agreement, a national of the United States serving in or employed in the
Philippines in connection with construction, maintenance, operation or defense of the bases and
reside in the Philippines by reason only of such employment is only liable for tax on Philippine
sources of income.

The Court of Appeals held that the Bases Agreement speaks of exemption from the payment of
income tax, not from the filing of the income tax returns . . .

Issue:
1. Whether or not Petitioners can be considered resident aliens.

2. Whether or not Petitioners are exempt from income tax under the RP-US Military Bases
Agreement.

3. Whether or not Petitioners must still file ITR notwithstanding the exemption.

Held:
1. Yes.

Revenue Regulations No. 2 Section 5 provides: An alien actually present in the Philippines
who is not a mere transient or sojourner is a resident of the Philippines for purposes of
income tax.Whether or not an alian is a transient or not is further determined by his: intentions
with regards to the length and nature of his stay. A mere floating intention indefinite as to time,
to return to another country is not sufficient to constitute him as transient. If he lives in the
Philippines and has no definite intention as to his stay, he is a resident. The Section 5 further
provides that if the alien is in the Philippines for a definite purpose which by its nature
may be promptly accomplished, he is considered a transient.However, if an extended stay
is necessary for him to accomplsh his purpose, he is considered a resident, though it
may be his intention at all times to return to his domicile abroad when the purpose for which he
came has been consummated or abandoned.


2. Yes.

Notwithstanding the fact that the Petitioners are resident aliens who are generally taxable, their
class is nonetheless exempt from paying taxes on income derived from their employment
in the naval base by virtue of the RP-US Military bases agreement.The Bases Agreement
identifies the persons NOT liable to pay income tax in the Philippines except in regard to
income derived from Philippine sources or sources other than the US sources. They are the
persons in whom concur the following requisites, to wit:
1) nationals of the United States serving in or employed in the Philippines;
2) their service or employment is "in connection with construction,maintenance, operation or
defense of the bases;
3) they reside in the Philippines by reason only of such employment; and
4) their income is derived exclusively from U.S. Sources.

3. Yes

Even though the petitioners are exempt from paying taxes from their employment in the Naval
Base, they must nevertheless file an ITR. The Supreme Court held that the filing of an ITR and
the payment of taxes are two distinct obligations. While income derived from employment
connected with the Naval Base is exempt, income from Philippine Sources is not. The
requirement of filing an ITR is so that the BIR can determine whether or not the US
National should be taxed. The duty rests on the U.S. nationals concerned to invoke
and prima facie establish their tax-exempt status. It cannot simply be presumed that they
earned no income from any other sources than their employment in the American bases and are
therefore totally exempt from income tax.