BIR Ruling

April 10, 1975 Quasha, Asperilla, Zafra, Tayag & Ancheta Lawyers San Pablo Building 114 Amorsolo St., Makati, Rizal Gentlemen : This refers to your letter dated December 13, 1974 stating as follows: "A client will soon be awarded by the U.S. Government the exclusive contract to distribute and sell "Pacific Stars and Stripes", which is an official publication of the U.S. Armed Forces, within the U.S. Military bases in the Philippines. Such distribution and sale will be limited only to "authorized persons", or those: cdt "(1) "individual, units, agencies and organizations, military or non-military, authorized by competent (US) Military authority to use United States Military Payment Certificates in those areas where United States Military Payment Certificates are in use; "(2) "individuals, units, agencies and organizations, military or non-military, regularly authorized to use U.S. currency or coin and ordinarily accorded the use and privileges of U.S. Commissary, Exchange or Clubs facilities; and "(3) "persons other than those identified above where such has been requested and/or approved by the national government of the particularly territory (Philippines) upon written consent of the contracting party." "At present, the sale and distribution of such a publication is undertaken by an agency of the U.S. Armed Forces. Can such a contract between our client and the U.S. government be construed a "concession" and our client a "concessionaire" under Art. XVIII of the US-PI Military Bases Agreement of 1947 pursuant to the ruling in the case of Araneta v. Manila Blue Pencil Company (L-8182), June 29, 1957)? Can our client then avail of the tax exemption granted therein?" In reply, I have the honor to inform you that the contract, as represented, fails within the contemplation of a "concession" and your client a "concessionaire" under the Supreme Court ruling in the case of Araneta v. Manila Blue Pencil Company, GR. No. L-8182, dated June 29, 1957, amplifying Article XVIII of the Military Bases Agreement entered into between the Philippine Government and the U.S. Government. Such being the case, your client is exempt from the payment of internal revenue taxes. However, as regards No. 3 above, if the sale is effected outside of the base, your client is no longer a concessionaire within the purview of the military bases agreement; hence, it is no longer exempt from internal revenue taxes on such sale. 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."