BIR Ruling No. 017-64

March 19, 1964 BIR RULING NO. 017-64 Messrs. Licuanan, Castro & Associates Certified Public Accountants Suite 335 Wm. Li Yao Bldg. Manila Gentlemen : This has reference to your letter dated June 7, 1963, requesting for and in behalf of your client, whether or not it is still require to file a return. You stated that: "As appointed auditors of a new corporate firm that will import films from abroad to be shown here in the Philippines thru a distributor or an agent who will receive a fixed rate of share of the receipts from said films exhibited, we have the honor to be informed of the following: llpr "1. Is our client (Owner of the film) be required to report its monthly receipts together with the corresponding 2% tax even if its distributor has paid it already? However, the payment was included in the total amount paid by the distributor for other owners of the films and in one official receipt only and under the name of the appointed distributor. Our clients appointed distributor claimed that it was an accepted procedure that they pay the 2% tax (to be reimbursed later by owners of the films undertaken by them) in one lump sum monthly under one official receipt in their name, thus relieving our client from declaring its gross receipts monthly for purposes of Section 195 of our National Internal Revenue Code. "2. Are rights to exhibit the imported films here in the Philippines a part of the cost of the film for purposes of importation subject to the computation of advance sales tax?" cdpr In reply thereto, I have the honor to inform you that under a cinematographic film distributorship agreement, the parties thereto (film owner and distributor) are in their individual capacities, distinct and separate from one another, subject to the 2% tax prescribed by Section 195 of the Tax Code on their gross receipts. In a distributorship agreement, the gross receipts of the film owner and distributor constitute of their respective shares in the gross proceeds derived from the exhibition of the cinematographic films. Therefore, your client as owner of the film should have filed his individual return on his gross receipts and paid the 2% tax thereon. The filing by the distributor of a single return to include both of his receipts and that of the film owner was an error and should be rectified. However, if actually the distributor had paid the correct amount of tax due on both of their gross receipts, the film owner need no longer file a return. Anent query No. 2, it is advised that cinematographic films are subject to the specific tax and not to the advance sales tax. As the specific tax is based on the length of the film (Section 146, Tax Code) and not on the landed cost thereof, it is immaterial whether or not the rights to exhibit the imported films form part of the cost thereof. prcd Very truly yours, (SGD.) BENJAMIN N. TABIOS Acting Commissioner of Internal Revenue