BIR Ruling [DA-626-04]

December 10, 2004 BIR RULING [DA-626-04] 57 (B); 165-95 Del Rosario & Del Rosario 15/F Pacific Star Building Makati Avenue corner Sen. Gil Puyat Avenue Makati City Attention: Atty. Ma. Jenny Arevalo De Villa and Atty. Joseph R. Rebano Gentlemen : This refers to your letter dated November 24, 2004 stating that Soriamont Steamship Agencies, Inc. (Soriamont) is a domestic corporation engaged in the maritime business, particularly as a general commercial ship agent for several foreign shipping and forwarding corporations; that as general commercial ship agent, Soriamont provides means for transporting goods whether containerized or break-bulk, whether in-bound (imported) or outbound (for export) anywhere in the world; that aside from being a general commercial ship agent, Soriamont also acts as general cargo agent and port agents for foreign commercial shipping companies; that on the other hand, Tasman Orient Lint (Tasman) is a non-resident foreign corporation, incorporated and existing under the laws of New Zealand; that Tasman is engaged in shipping and carriage of goods/cargo, with its vessels calling on major gateways and ports from New Zealand and all over Asia; that Tasman was formed from a merger of the former Tasman Asia and New Zealand-Orient Line, which were both foreign corporations; that presently, Tasman is jointly owned by the China Navigation Company in Hong Kong and the Ahrenkiel Group of Germany; that it has its head office at Rotterdam, The Netherlands and maintains offices at Auckland, New Zealand; Singapore, Indonesia, Hong Kong, Osaka and Tokyo, Japan; that Tasman does not have a resident agent, a branch office or an existing subsidiary company in the Philippines; that Tasman does not directly conduct business in the Philippines; that freight coming from the Philippines are booked and handled only by Tasman's general commercial ship agent, Soriamont; that Tasman is a non-resident foreign principal of Soriamont; that although Tasman has been registered with the BIR and has an existing Taxpayer Identification Number (TIN), such registration is made only for purposes of settling/remittance of taxes due to the Philippine government by said company, for income with Philippine situs; that said registration with the BIR however was never intended to be registration of residency in the Philippines or of conducting business in the Philippines in its own name; and that Tasman was and remains to be a mere-non-resident foreign principal of Soriamont. In connection therewith, you now request confirmation of your opinion that the income in the form of commissions derived by Soriamont, as a general commercial ship agent of Tasman, a foreign non-resident shipping and forwarding corporation, is not subject to withholding tax, prescribed in Section 57 of the Tax Code of 1997, as implemented by Revenue Regulations No. 2-98, as amended by Revenue Regulations No. 17-2003. In reply thereto, please be informed that only payments made to persons enumerated in Revenue Regulations No. 2-98, implementing Section 57(B) of the Tax Code of 1997, are subject to the expanded withholding tax. Since payments made by the forwarding shipping and forwarding corporations, like Tasman, although subject to income tax is not subject to the withholding tax since as a non-resident foreign corporation it is not a duly authorized withholding agent for the government. Consequently, income in the form of commissions derived by Soriamont, as general commercial ship agent, is not subject to the expanded withholding tax prescribed in Revenue Regulations No. 2-98, as amended. TcDaSI WHEREFORE, in view of the foregoing , this Office hereby confirms your opinion that the income in the form of commissions derived by Soriamont, as general commercial ship agent of foreign shipping and forwarding corporations, like Tasman, although subject to income tax, are not subject to the creditable withholding tax prescribed in Section 57 of the Tax Code of 1997, as implemented by Revenue Regulations No. 2-98, as amended by Revenue Regulations No. 17-2003. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service