BIR Ruling [DA-261-96]

July 19, 1996 BIR RULING [DA-261-96] Law Offices of Valdes, Valdes & Associates 5th Floor, CJVC Building 108 Aguirre Street, Legaspi Village Makati City Attention: Atty . Victoria Catherine G . Cochico Gentlemen : This refers to your letter dated February 2, 1996 requesting for and in behalf of your client, Ringling Bros. Barnum & Bailey International, Inc. for availment of relief from double taxation under the provisions of the RP-US Tax Treaty. aisadc It is represented that Ringling Bros. Barnum & Bailey International, Inc. is a corporation incorporated under the laws of the US and is the producer of an ice show entitled "Walt Disney's World on Ice", which will be performing in Manila during the month of February 1996. In reply thereto, please be informed that paragraph (1), Article 8 of the RP-US Tax Treaty provides as follows: "ARTICLE 8 "BUSINESS PROFITS "(1) Business profits of a resident of one of the Contracting States shall be taxable only in that State unless the resident has a permanent establishment in that other Contracting State. If the resident has a permanent establishment in that other Contracting State on the business profits of the resident but only on so much of then as are attributed to the permanent establishment." Moreover, Article 5(1) and (2) of the said treaty provides, viz: "ARTICLE 5 "PERMANENT ESTABLISHMENT "(1) For the purposes of this Convention, the term "permanent establishment" means a fixed place of business through which a resident of one of the Contracting States engaged in a trade or business. "(2) The term "fixed place of business" includes but is not limited to: (a) A seat of management; (b) A branch; (c) An Office; (d) A store or other sales outlet; (e) A factory; (f) A workshop (g) A warehouse (h) A mine, quarry, or other place of extraction of natural resources; (i) A building site or construction or assembly project or supervisory activities in connection therewith, provided such activity continues for a period of more than 183 days; and (j) The furnishing of services, including consultancy services, by a resident of one of the Contracting States through employees or other personnel, provided activities of that nature continue (for the same or a connected project) with the other Contracting State for a period or periods aggregating more than 183 days." Considering that the "Walt Disney's World on Ice" will run during the month of February 1996 or a total of 29 days, Ringling Bros. Barnum & Bailey International, Inc. does not have a permanent establishment. cdtech Such being the case, Ringling Bros. Barnum & Bailey International, Inc. is not subject to Philippine income tax and consequently to the 35% withholding tax prescribed under Section 25(b)(1) of the Tax Code, as amended. Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service) By: ALICIA L. TOMACRUZ Head Rev. Executive Assistant Legal Service