BIR Ruling

December 8, 1972 The Manila Hilton Manila Attention: Mr . Gonzalo Villarin Gentlemen : This refers to your letter dated November 16, 1972 requesting clarification on the implementation of Presidential Decree No. 31 regarding the exemption of foreign tourists and travellers from taxes on receipts from hotel room occupancy as prescribed by Revenue Regulations No. 10-72. cdta In reply, I have the honor to inform you as follows: As prescribed by the Regulations, "in order to avail of the exemption, the tourists or travellers must pay for their hotel room occupancy in dollars or other acceptable foreign currency; and it is of course understandable that the tourist or travellers must settle their hotel room occupancy in acceptable foreign currency upon checking out of the hotel. But you have presented some instances, where the tourists do not actually and directly settle their room accounts by actual foreign currency payment, and such instances follow: 1. Holders of international credit cards only sign their accounts upon check-out from the hotel. Their hotel charges are billed to the card company and are paid to you in US dollars through the mails. These dollar receipts are immediately deposited by you with authorized agent banks. The requirement of dollar payment may be deemed complied with in this instance. However, you should post the payment upon your receipt of the dollar payment in your appropriate tourist register indicating the date of receipt of the dollar payment. You should also indicate in your quarterly report to this Office prescribed by the Regulations the name of the authorized agent Bank with which you deposited your dollar receipts and date of deposit. A copy of said report should be furnished the Central Bank. 2. An international card company with a local office pays the hotel in pesos, but their dollar receipts representing payment of card holders are regularly reported to the Central Bank. This instance is allowable, but the local card office must pay the hotel in dollars. Exemption shall not be allowed, should payment be in pesos. The requirements prescribed in the answer to question No. 1 should be followed in this instance. 3. Some tour groups and individuals are booked to stay in the hotel by foreign travel agencies or wholesalers. Their hotel charges are billed to and paid by the foreign travel agent or wholesaler in acceptable foreign currency through the mails. In this instance, since the hotel is actually to receive payment in dollars, exemption may be recognized. It may be stated, however, that the individual names of those covered by these tour groups should be listed in your appropriate tourist register and their respective hotel room bills duly indicated. The requirements prescribed in the answer to question No. 1 should also be followed. 4. There are international travel agents and wholesalers who book tour groups and individuals with local travel agents who in turn book them in hotels. The local agent pays the hotel in pesos and receives payment from the foreign travel agent in dollars. If the local travel agent is an authorized dealer in foreign exchange, its dollar receipts are deposited in authorized agent banks and audited by Central Bank representatives. This set-up brings about payment in dollars. Exemption may, therefore, be recognized, but the local travel agent in fact should not be allowed to pay in pesos, the tourists concerned having actually paid dollars to the foreign travel agent who also actually paid the local agent in dollars. The requirements prescribed in the answer to question No. 1 should similarly be followed. 5. Local companies, branch offices and subsidiaries of foreign companies normally have technicians and executives from abroad on business trips in connection with their operations pay the hotel in pesos. In this instance, you do not recognize the exemption. Definitely, there is no dollar payment involved. You are, therefore, right in not recognizing exemption. 6. Crew members of airlines and ocean-going vessels are not being exempted from hotel room taxes as they are at present not considered tourists or foreign travellers. Should a crew member pay in acceptable foreign currency, will he be exempt from tax? The crew members may be considered as travellers during their stay in the Philippines. They may, therefore, be exempted if they pay in acceptable foreign currency. The requirements prescribed in the answer to question No. 1 equally apply in this instance and should be followed. As regards the matter of whether or not you may continue the use of your present records of arrival and departure of guest amended to contain all the information desired to be contained in the register book exclusively for foreign tourists and travellers prescribed by the Regulations, please be informed that inasmuch as said records contain all the information that the regulations require to be contained in the special register book, you may continue the use of said records of arrival and departure in lieu of the prescribed special register book. cdti Very truly yours, MISAEL P. VERA Commissioner of Internal Revenue