Tax Consequences of Being a Finance Manager of an Importing and Exporting Company

February 20, 1996 BIR RULING NO. 018-96 24, 102 000-00 018-96 Mr. Perfecto San Jose 6 Primero de Ono St. Cotabato City S i r : This refers to your letter dated August 10, 1995 stating that you are the Finance Manager of an importing and exporting company; that you sell Philippine products to foreign countries; that from your sales to a foreign country, said foreign government withholds amounts representing so-called taxes; that you import goods from foreign countries and distribute the same locally; that your importation of goods are sold as is, some are assembled and sold and goods sold as assembled undertake the process of repair where you charged service fees; and that you pay taxes to the foreign government and also to the local government. cdta Based on the foregoing, you now raise the following queries: "1. Is the foreign government right in withholding amounts representing a tax from our export proceeds? "2. From our operations in the Philippines as aforementioned what taxes do we pay? "3. Are we not taxed doubly by the foreign and local government on the same undertaking?" In reply, please be informed as follows: 1. We cannot comment on the laws of other country. However, a foreign government has the right in withholding amounts representing a tax from your export proceeds. The power of taxation is inherent in sovereignty as an incident or attribute thereof, being essential to the existence of every government. It exists apart from constitutions and without being expressly conferred by the people. (71 Am. Jur. 2d 397-398) The primary purpose of taxation on the part of the government is to provide funds or property with which to promote the general welfare and protection of its citizens. In its broadest and most general sense, taxation includes every imposition of charge or burden by the sovereign power upon the persons, property, or property rights for the use and support of the government and to enable it to discharge its appropriate functions. (71 Am. Jur. 2d 343-343) 2. A tax of 35% is imposed upon the taxable income received during each taxable year from all sources within and without the Philippines by every corporation organized in, or existing under the laws of the Philippines pursuant to Section 24 of the Tax Code, as amended. You are also subject to the value added tax on the local sales of your goods and services. 3. Double taxation refers to the act of imposing taxes twice for the same property/purpose, by the same taxing authority, within the same jurisdiction or taxing district, in the same taxing period. Accordingly, double taxation will not apply in your case. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue