BIR Ruling

August 11, 1969 2nd Indorsement Respectfully returned to the Honorable, the Secretary of Finance, Manila the within papers relative to the request of the Department of Foreign Affairs for a ruling on whether locally produced products like spare parts, equipment, liquor, tobacco and other articles which may be procured by foreign airlines from the producers thereof, to form part of their aircraft stores can be considered as exportation or consignment abroad and therefore, free from the payment of internal revenue tax with the following comment. Export means to carry or send abroad, especially to foreign countries, as merchandise or commodities in the way of commerce, (Webster' International Dictionary). In a case, it was held that the mere transportation out of the country of a commodity to be consumed on the transporting vessel is not an "export", (Schenley Distributors vs. State Tax Commissioner, 12 A-2d 638, 640, 18 N. J. Misc. 266). It therefore becomes apparent that the procurement of locally produced or manufactured articles by foreign airline companies from the producers or manufacturers thereof to form part of their aircraft stores is a domestic sales, hence, subject to the corresponding internal revenue taxes. However, it appears that the ruling is being requested by the Department of Foreign Affairs in connection with the RP-Japan air negotiations now going on. If the negotiators in the current RP-Japan air talks would include in the terms of the agreement a proviso where locally produced articles may be procured by airline companies of Japanese registry from the local producers thereof to form part of their aircraft stores free from the payment of internal revenue taxes and the same right is accorded airline companies of Philippine registry in effecting similar procurements for similar purposes in Japan, then this Office interposes no objection to the inclusion of such a proviso. (SGD.) MISAEL P. VERA Commissioner of Internal Revenue