Tax Liability of Foreign-Based Firm Which Ships Goods via the Phil. through the SBSEZ

February 4, 1998 BIR RULING NO. 006-98 RR 1-95 (Sec. 3 (1) 000-00-006-98 Atty. Evaristo O. Gana GOLDLINK STEAMSHIP, INC. Suite 502, Z & H Apartelle 545 Arquiza Street, Ermita M a n i l a S i r : This refers to your letter dated June 10, 1997 requesting for our opinion on the tax liabilities, if any, of a foreign-based corporation which ships goods via the Philippines through the Subic Bay Special Economic Zone (SBSEZ) for transshipment purposes. It was stated in your letter that Gold Link Steamship , Inc . is an agent of GOLD KATE LTD . (HK) , a Hongkong based corporation that ships goods to the Philippines via Subic merely for transshipment purposes through SBSEZ; that the goods are not intended to be introduced in the Philippine market; that such goods are temporarily stored in a warehouse at Subic and is being transhipped for a fee to consignees in other countries such as Thailand, Korea and Singapore by the Subic Warehouseman upon the instructions of the Hongkong-based corporation; that at the time of the arrival of the goods, there is no consignee present in Subic, hence, there is no danger that they would be introduced in the Philippine market; that all transactions pertaining to the subject goods are made outside the Philippines; and that the transshipment is being resorted to only because of the lower cost in storage, transport and handling agent in fees in the Philippines. In reply, please be informed that under Section 3(1) of Revenue Regulations No . 1-95 dated January 24, 1995, "transshipment" is defined as follows, viz: "Transshipment refers to transshipment of articles discharged at ports or airports of entry located in Customs territory destined for delivery to the zone, and articles coming from the latter intended for export through a Philippine Customs port/airport of entry which articles may be transported under bond, upon examination, and consigned to the Collector at the port of destination/export, who will allow the consignor or consignee, as the case may be, to make entry for exportation." Thus, applying the foregoing definition, no literal transshipment has transpired on the activities of GOLD KATE LTD. (HK) when it ships its goods to the Philippines via Subic through the Subic Bay Special Economic Zone (SBSEZ) because the shipped articles are not destined for delivery to the zone nor do they consist of articles coming from the zone intended for export through a Philippine customs port/airport of entry. SBZES is a freeport zone outside customs territory and therefore goods discharged thereto has never entered the Philippines customs territory at all. Such being the case, the shipper of the goods, i.e., GOLD KATE LTD . (HK) , not being engaged in any taxable activity in the Philippines , is not subject to any Philippine tax . The presence of its agent, i.e., GOLD LINK STEAMSHIP INC ., is merely for purposes of monitoring its activities. Furthermore, in transshipment, bond is being collected, in lieu of duties and taxes imposable. This ruling is being issued on the basis of the 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.) LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue