Taxability of a Business of Crewing/Manning Vessels Trading Worldwide

February 2, 1988 BIR RULING NO. 021-88 102 (a) (2) 394-87 021-88 Gentlemen : This refers to your letter dated November 23, 1987 stating that you are engaged in the business of crewing/manning vessels trading worldwide; that you execute a manning contract with the owners/managers of the vessels whereby you undertake/provide the supply as well as the personnel management requirement of the entire crew from master to the last deck hand; that as a consideration for such undertaking, you receive fees on a per vessel basis; that to date, you are crewing/manning two (2) Philippine-flagged vessels and one (1) bareboat vessel of foreign owners but registered in the Philippines in the name of a Philippine corporation (Bareboat Charterer) under the provision on temporary registration pursuant to P.D. Nos. 760-866 and 1711; that your monthly fees, together with ship disbursements, allotments and other reimbursable peso disbursements are repaid/or reimbursed to you in foreign currency by way of direct remittance by the vessel's foreign time charterers, not through the registered Filipino owner (a Philippine Corporation); and that such remittances are in accordance with the special arrangement between the registered Filipino owners and the time charterers of the vessels whereby the latter is allowed to deduct the manning fees and other reimbursable expenses directly remitted to you from the time of the charterhire of the vessels. Based on the foregoing, you request clarification as to whether you are exempt from VAT, or subject to the value-added tax of 0%. In reply, please be informed that under your manning contract with the owners/managers of the vessels wherein you undertake to provide/supply the crew and personnel management requirements of a foreign-owned, but Philippine-flag vessels engaged in worldwide trade, you are deemed to have performed all of such services within the Philippines; hence, you are taxable under Section 102(a) of the Tax Code, as amended by Executive Order No. 273. If you are VAT-registered and the consideration paid to you is in acceptable foreign currency remitted inwardly and accounted for in accordance with the rules and regulations of the Central Bank you are subject to the value-added tax of 0% pursuant to Section 102(a)(2) of the Tax Code, as amended by Executive Order No. 273. However, if you are not VAT-registered, or if the consideration for your services is not in acceptable foreign currency, you are subject to the value-added tax of 10% of your gross receipts pursuant to Section 102(a) of the same Code. cdtech Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner