BIR Ruling No. 018-80

September 30, 1980 BIR RULING NO. 018-80 37-e 000-78 18-80 Messrs. Belo, Abiera, San Jose, Pagunsan & Guinto 6th Floor, Cibeles Building 6780 Ayala Avenue Makati, Metro Manila Gentlemen: This refers to your letter dated August 22, 1979 requesting a ruling as to whether the remittances by Prudential Bank (Malate Branch) to your client, Time, Inc.,a non-resident foreign corporation which has its principal office in Rockefeller Center, New York, U.S.A.,of payments for subscription and sale of Time Magazine to Philippine subscribers are subject to Philippine income tax. Investigation conducted by this Office disclosed that copies of Time Magazine are sold to a Philippine subscriber who first fills out a subscription order card enclosed in any issue of the Time Magazine which order card is pre-addressed to Prudential Bank, Malate Branch, San Martin Building, 1560 A. Mabini Cor. Pedro Gil, Ermita, Metro Manila, Philippines, or a subscription may be ordered through an authorized subscription agency in the Philippines, and as payment for subscription, the Philippine subscriber encloses a check or money order in the said subscription form; that pursuant to an Agreement executed by and between Prudential Bank and Time, Inc.,the former upon receipt of the subscription order, issues a receipt to the Philippine subscriber, for and in behalf of Time, Inc.;that since Prudential Bank is not authorized to accept or enter into a subscription contract with a Philippine subscriber, the subscription order is forwarded to Time, Inc. branch office in Tokyo, Japan for acceptance or rejection; that if the subscription order is accepted, Time, Inc. branch in Tokyo, Japan enters the subscription into the computer and instruct Time, Inc.,HongKong branch, where the magazines are printed, to ship the subscription issue to the Manila Post Office pre-addressed to the Philippine subscriber and the subscription issue is subsequently sent as a second class mail matter to the Philippine subscriber by the Manila Post Office; that the payment for subscription from individual subscribers are consolidated at the Prudential Bank which in turn remits said payments to Time, Inc. head office in New York; and that if the payment is not received in New York within the agreed period, the subscription is cancelled. In reply, I have the honor to inform you that income derived from the purchase and sale of personal property is income derived from the place in which it is sold. (Sec. 37(e), Tax Code; Sec. 159, Revenue Regulations No. 2) In the instant case, the perfection as well as the consummation of the sale took place abroad. The acceptance or rejection of the subscription order is made in the Time, Inc. branch office in Tokyo, Japan. Moreover, the payment for subscriptions from individual subscribers are remitted by the Prudential Bank, Malate Branch or any authorized subscription agency in the Philippines for that matter, to Time, Inc. head office in New York. Consequently, title over the subscription copies passed to the Philippine subscribers abroad from the moment they were posted in the HongKong Post Office by Time Inc. HongKong branch pre-addressed to a Philippine subscriber. In view of all the foregoing, this Office is of the opinion as it hereby holds that inasmuch as the sale of the subscription copies of the Time Magazine took place abroad, the income derived by Time, Inc. from the sale thereof to Philippine subscribers is deemed income from sources not within the Philippines, thus, not subject to Philippine income tax and consequently, not also subject to the 35% withholding tax prescribed in Section 53(b)(2) of the Tax Code, as amended. cdt Very truly yours, RUBEN B. ANCHETA Acting Commissioner