The study presents an overview of RA 9225 and discusses the issues on the tax treatment of dual citizens, specifically the provisions of the RP-US Tax Treaty as the United States hosts the most number of Filipino emigrants.
Dual/multiple citizenship involves the simultaneous holding of more than one citizenship or nationality. The passage of RA 9225 or the Dual Citizenship Law on August 29, 2003 allows natural-born Filipinos who have lost their Filipino citizenship through naturalization in a foreign country to regain their citizenship. It enables them to enjoy once again full civil and political rights. These include owning land and property in the Philippines; engaging in business or commerce as a Filipino; traveling bearing a Philippine passport; voting in national elections; practicing profession in accordance with Philippine laws and regulations; and other rights and privileges enjoyed by a Filipino.
RA 9225 provides many benefits to dual citizens. However, it also brings certain legal obligations, one of which relates to taxes. For income tax purposes, the tax treaties of the Philippine government with other countries ensure that Filipinos working in other countries with which it has a treaty will not have to pay taxes on income earned in those countries and/or their tax payment may be recognized as a tax credit pursuant to applicable treaties and the NIRC.
In the case of the estate tax, a Filipino resident who is at the same time an American citizen owning property located in the United States may simultaneously be subject to estate taxes imposed by the Philippine taxing authority and by the US government.
As regard the donor’s tax liability of a dual citizen, the residence of the donor is controlling and not his citizenship. In the United States, there is practically no income tax on gifts, except for cases wherein the donor gives more than the annual exclusion amount of $ 11,000 to a person other than his/her spouse within a single year. The tax is imposed on the donor and not on the donee.
The Dual Citizenship Law recognizes the contribution of Filipino emigrants in transforming the current economic and political condition of the country. However, it fails to specifically provide for the taxability of dual citizens hence, it is important to clarify in the law the taxability of income derived by dual citizens from sources outside the Philippines as well as their properties abroad for estate and donor’s tax purposes.
