BIR Ruling

October 11, 1973 Mr. Oscar M. Andres Resident Manager Bayview Hotel M a n i l a S i r : This refers to your request for clarification relative to the implementation of Presidential Decree No. 31, as implemented by Revenue Regulations No. 10-72. Specifically you posed the following questions viz.: "1. What are the acceptable foreign currencies which we may accept in order to grant the tax exemption? "2. How are we going to treat payment of guests part in foreign currency and the difference in local (peso) currency? "3. Cardholders of foreign origin, e.g. American Express Company, claim that they pay this account to card establishments in foreign currency. Payment of these card establishments to us however, is in the form of local currency. Under the foregoing example, are cardholders of foreign origin entitled to the tax exemption?" In reply, I have the honor to inform you as follows: 1. Foreign currencies that are acceptable under Central Bank rules and regulations may be accepted as payment of hotel room occupancy for purposes of the exemption. 2. In cases of payments for hotel room occupancy made by foreign tourists and travellers a part of which is in foreign currency and the difference in local (peso) currency, only the payment made in foreign currency is exempt from taxes. The local (peso) currency portion of the payment shall be subject to the corresponding internal revenue tax. aisadc 3. In connection with the operations of American Express Company, please be informed that the Central Bank confirmed the fact that: a. The American Express Company is provided with a foreign exchange license and that under said license it is treated as a foreign department of a commercial bank and, therefore, it follows Central Bank regulation in acquiring and disbursing dollars from its New York/Manila foreign exchange account; b. That its New York/Manila account is part of the foreign exchange reserve of the Philippines; and c. That its parent company reimburses its peso payments to hotels in dollars which reimbursement is made to its New York/Manila foreign exchange account in New York, and at the time of reimbursement, the dollars are already in the exchange reserve of the Philippines. In the light of the Central Bank confirmation of the fact that the corresponding dollar equivalent of American Express Co. peso payments are actually accounted for as part of the foreign exchange reserve of the Philippines, the charges from hotel occupancy of tourists and foreign travellers (who are cardholders of American Express Co.) covered by the foregoing operations, are exempt from internal revenue taxes. However, for purposes of record, and in order that you can comply with the requirements of the regulations, you must demand from the American Express Company when it pays you in pesos, information as to the amount of the corresponding dollar deposit made by its parent company to its New York/Manila foreign exchange account and the corresponding package tour covered thereby, and evidence of dollars deposit. aisadc Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue TAN-1601-593-5 "TAXPAYERS SHOULD INDICATE THEIR TAN IN ALL COMMUNICATIONS TO THE BIR."