Exchange Rate Rules for Tax Conversion

The circular prescribes exchange-rate rules for converting U.S. dollar and other foreign currencies to Philippine pesos for income tax collection of non-resident citizens.
The rules govern conversion of items of gross income and deductions from gross income earned and incurred in foreign currency and expressed in U.S. dollar and/or other foreign currencies.
The circular governs conversion of (1) income items and deductions during a taxable year, and (2) tax liability when it is actually paid.
The circular applies when currency conversions are needed for (a) computation, (b) payment in peso, (c) payment in U.S. dollar, (d) payment in other foreign currency, and (e) deficiency income tax after audit.

The exchange rate for converting items of gross income and deductions from gross income from other foreign currency to U.S. dollar is the average interbank reference rate for the taxable year when the gross income and deductions were earned and incurred, respectively.
The average interbank reference rate is obtained from the “U.S. Dollar Rates of Selected Currencies” available from the Treasury Department of the Central Bank of the Philippines.
If the pertinent foreign currency is not among the listed currencies, the International Tax Affairs Division furnishes the reference rate to utilize.
For the taxable year 1990, the U.S. Dollar Rate of Selected Currencies are shown in EXHIBIT A.

Amounts converted to U.S. dollar using the average interbank reference rate are then converted to Philippine peso using the average peso/dollar interbank reference rate during the taxable year when the gross income and deductions were earned and incurred, respectively.
The peso/dollar interbank reference rate is contained in the “Peso/Dollar Monthly Averages” report issued by the Central Bank of the Philippines.
For the taxable year 1990, the average peso/dollar interbank reference rate is P24.3105 as the equivalent of one (1) U.S. dollar.

For converting the tax liability in U.S. dollar to Philippine peso, the prevailing peso/dollar interbank reference rate at the time the tax liability is actually paid is applied.
The circular requires using the prevailing rate effective at payment time.
The prevailing exchange rate for this purpose is published daily in selected national newspapers.

If the tax liability is to be paid in other foreign currency, the amount of the tax liability in U.S. dollar is converted to the other foreign currency using the prevailing exchange rate in the foreign post at the time of actual payment.

If any deficiency income tax becomes due after audit by the BIR, the deficiency tax is determined by deducting from the income tax due in U.S. dollar per audit any previous income tax payments also stated in U.S. dollar.
The deficiency tax is converted to Philippine peso using the prevailing interbank reference rate at the time of assessment or preparation of the Transcript of Assessment.

All previous revenue memoranda and portions thereof inconsistent with BIR Revenue Memorandum Circular No. 76-91 are amended or modified accordingly.