Income taxation: Filipino employees employed by foreign organization funded by foreign funds

Facts

- Country G and Ph entered into a bilateral agreement -Based on that agreement,, XYZ org was formed; XYZ org is a foreign org; it is recognized by the NEDA

- XYZ org's main task is to implement the stipulations of the said agreement

-One pertinent provision of the agreement is that Country G will give support particularly technical support to Ph in the form of projects and programs such as comprehensive land use plans, solid waste managements, disaster preparedness prog , etc.

-in implementing these programs XYZ org teams up with differnt govt agencies like DAR, DENR, DTI , LGUs, etc.

-at the end of the programs, the materials and equipments used are donated to the collaborating govt agency

-XYZ org is given tax exemptions in purchasing such equipments

-XYZ org's funds come solely from taxpayers money from Country G
-XYZ is considered a non profit organization
-Some employees of XYZ are Filipinos

-XYZ employees' salary likewise comes from Country G taxpayers money

-XYZ does not withhold tax from its employees

ISSUE: WON Filipino employees of XYZ org should be subjected to income tax

- What provisions of Ph laws applies or covers this case