Swedish Nationals Performing Personal Services without the Philippines Not Subject to Philippine Income Tax

January 25, 1984 BIR RULING NO. 017-84 37-c-003-77-017-84 Gentlemen : This refers to your letter of August 26, 1983 requesting confirmation that the amount paid by Skanfil Shipping, Inc., Trans Malayan Shipping, Inc., Trans Swedish Shipping, Inc. and Trans European Shipping, Inc. (hereinafter collectively referred to as domestic corporations) to International Crewing Service (ICS) for services rendered by the Swedish employees of the ICS are not subject to Philippine taxes. It is represented that your company, the Intermodal Shipping Agencies, Inc., acts as manager of the above-mentioned domestic corporations which own bareboat sophisticate reefer vessels, plying worldwide routes without touching a Philippine port. The vessels are on time charter with Salen Shipping, Inc. (Salen), a non-resident foreign corporation incorporated under the laws of Sweden. Upon request of the domestic corporations, Salen have on board the vessels Swedish nationals under the employment of ICS to act either as members of the regular crew complement and/or as trainors/advisers to the Filipino crew. In reply, I have the honor to inform you that, as previously ruled by this Office "the principle of extraterritoriality of Philippine vessels should not be the factor in resolving the question of whether Filipino crew of said vessels are to be considered non-resident citizens." (BIR Ruling No. 003-77 dated June 1, 1977) In other words, this Office does not recognize the rule that vessels form in law part of the territory of the state of registry. Such being the case, the personal services of the aforementioned Swedish nationals are performed without the Philippines and therefore their compensation is not subject to the Philippine income tax. (Sec. 37(c)(3), Tax Code) Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner