Manila Bay Harbor Pilots' Partnership

July 2, 2009 BIR RULING [DA-(C-110) 339-09] Sec. 26; BIR Ruling DA-049-08 Manila Bay Harbor Pilots' Partnership Pier 13 Pilot Landing South Harbor Port Area Manila Attention: Socorro C. Gabrinao Accountant Gentlemen : This refers to your letter dated May 08, 2009 requesting in effect exemption from withholding tax as local supplier of services. SHCaEA It is represented that Manila Bay Harbor Pilots' Partnership is a general professional partnership duly organized and existing under the laws of the Philippines for the purpose of rendering pilotage services to domestic and international vessels approaching and leaving the ports of Manila and Bataan. In reply, please be informed that pursuant to Section 26 of the Tax Code of 1997, as amended, general professional partnerships are not subject to income tax. However, persons engaging in the practice of their profession as partners in a general professional partnership shall be liable for income tax in their separate and individual capacities. Each partner shall report as gross income his distributive share, actually or constructively received, in the net income of the partnership. For purposes of computing the distributive share of the partners, the net income of the partnership shall be computed in the same manner as a corporation. Moreover, general professional partnerships are exempt from the imposition of withholding tax under Revenue Regulations (Rev. Regs.) No. 2-98, as amended. It is noteworthy to mention, however, that income payments made periodically or at the end of the taxable year by a general professional partnership to the partners, such as drawings, advances, sharing, allowances, stipends and the like, are subject to the 10% creditable withholding tax pursuant to Section 2.57.5 (B) (4) of Revenue Regulations (Rev. Regs.) No. 14-2002. It is understood therefore, that professional fees received by Manila Bay Harbor Pilots' Partnership for services rendered are exempt from the withholding tax provisions of Rev. Regs. No. 2-98, as amended. CHcTIA Moreover, pursuant to Rev. Regs. No. 1-2003 dated January 2, 2003, sale of services by persons engaged in the practice of profession or calling and professional services rendered by general professional partnerships are subject to value-added tax (VAT). 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, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service