BIR Ruling

September 7, 1977 Messrs. Sycip, Gorres, Velayo & Co. Certified Public Accountants P. O. Box 589, Manila Attention: Mr . C . C . Sison Tax Division Gentlemen : This refers to your letter dated February 18, 1977 requesting confirmation of your opinion to the effect that the remittance by your client, International Multifoods Corporation Philippines Branch, of its profits earned from March 1, 1973 to February 28, 1975 to its Head Office, International Multifoods Corporation, Minnesota, U.S.A., is not subject to the 20% profit remittance tax imposed by Section 24(b)(2) of the Tax Code, as amended by Presidential Decree No. 778. It is represented that the Central Bank in a letter dated February 3, 1977 allowed the Philippine Branch to remit to its Head Office the foreign equivalent of P298,097.61 representing profits earned by the branch for the period from March 1, 1973 to February 28, 1975. The Central Bank, however, required the Philippine Branch to pay the 20% remittance tax on the amount of P298,097.61. In reply, I have the honor to inform you that Section 24(b)(2) of the Tax Code, as amended by Presidential Decree No. 778, provides that "Any profit remitted abroad by a branch office to its mother company shall be subject to tax of twenty percent . . . " (Emphasis ours). In other words, there should be remittance of profits in order that said remittance tax may accrue. Such being the case, the tax accrues whether the profits were earned before or after Presidential Decree No. 778 as long as the same were remitted abroad to the Head Office. It should be noted that profits earned before Presidential Decree No. 778 still continue to remain as profits even after the effectivity of said Decree. Consequently, upon the remittance of said profits after the effectivity of Presidential Decree No. 778 on August 24, 1975 they become subject to the 20% remittance tax. And if the profits were remitted after June 3, 1977, they became subject to the remittance tax at the rate of 15% only. (PD 1158) Very truly yours, CONRADO P. DIAZ Deputy Commissioner of Internal Revenue TAN-D2567-D-1025-A-2