Domestic Shipping Company Engaged in Overseas Shipping, Liability to Income Tax

October 5, 1971 BIR RULING NO. 021-71 Domestic shipping company engaged in overseas shipping, liability to income tax . X corporation is engaged in the overseas shipping business. It is a domestic corporation and is 100% Filipino owned. It claims exemption from the payment of income tax by virtue of the provisions of Republic Act No. 1407, as amended by Republic Act No. 4146, the Overseas Shipping Act, and contends that Republic Act No. 5431 has not repealed or removed said exemption. The proposed assessment was computed in accordance with BIR Ruling No. 69-006, dated February 27, 1969, which ruled that the exemption granted to Philippine overseas shipping companies under Republic Act No. 1407 has not repealed or removed said exemption. By the enactment, however, of Republic Act No. 5963 dated June 21, 1969, which extended the exemption period for another five (5) years or until September 9, 1975 in favor of Philippine overseas shipping lines, there is a very clear showing of legislative intention that there would be no period of interruption of the exemption from the original Act of 1955 (R.A. No. 1407). There can be no doubt, therefore, that the provisions of Republic Act No. 5963 clearly negated or obliterated the abovementioned ruling. Accordingly, BIR Ruling No. 69-006, dated February 27, 1969 is revoked. It should be noted that pursuant to Section 2 of Republic Act No. 5963 the exemption is subject to the condition that they (Philippine overseas shipping companies) shall invest the entire net income realized during the period of exemption which would have otherwise been taxable under the provisions of Title II of the National Internal Revenue Code in the construction, purchase, or acquisition of vessels and equipment and/or in the improvement of its vessels and equipment. The amount shall not be withdrawn for a period of twenty years after the expiration of the period of income tax exemption. Any amount withdrawn before the end of this period shall be subject to the corresponding income tax including surcharges and interest. aisa dc