BIR Ruling

August 3, 1967 Joaquin Cunanan & Co. Certified Public Accountants P. O. Box 2288, Manila Gentlemen : This refers to your letter dated May 13, 1967 stating the following: "We request a ruling on the business tax liability, if any, of X Co. Phil. under the following proposed plan. LibLex "X Co. Phil. would be incorporated here as a wholly-owned subsidiary of A Co., International, U.S.A. (A Co. International has branches and/or subsidiaries in almost all countries of the world). Except for its manager, secretary and perhaps an accountant later on, X Co. Phil. would have no other personnel. Neither would it have any delivery equipment. "X Co. Phil. would take care of the shipment abroad of household furniture; furnishings and other related articles. Specifically, it would operate thus: Suppose Juan de la Cruz decides to reside abroad. He engages X Co. Phil. for the latter to move his belongings from the Philippines to, say, the United States. "X Co. Phil. charges Juan de la Cruz fees according to its scheduled rates. Mr. de la Cruz then simply waits for his belongings to be delivered to any point he wants. "In moving the articles from "door to door", actually from the Philippines to a foreign place, X Co. Phil. will engage the services of a brokerage firm. The brokerage firm will pack, box or crate Mr. de la Cruz's articles, load them on its delivery trucks and ship them by boat or airplane, as the case may be. For these services the brokerage firm will bill X Co. Phil. "It should be noted that X Co. Phil. is not acting as agent for the brokerage firm or for any party. It solicits business for its own account. And as far as the owner of the furniture is concerned, he is dealing with X Co. Phil., not with the brokerage firm." In reply thereto, I have the honor to inform you that should X Company Philippines engage in the aforementioned business activities it will be considered a commercial broker. Under Section 194(t) of the Tax Code, the term "Commercial broker" includes all persons, other than importers, manufacturers, producers, or bona fide employees, who, for compensation or profit, sell or bring about sales or purchases of merchandise for other persons, or bring proposed buyers and sellers together, or negotiate freights or other business for owners of vessels, or other means of transportation, or for the shippers, or consignors or consignees of freight carried by vessels or other means of transportation. This term also includes commission merchants. Accordingly, X Company Philippines is subject to the P150.00 fixed annual tax and to the 6% percentage tax prescribed in Section 182 (A)(3)(s) and 195, both of the Tax Code. cdt Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue