Income Tax of 2 1/2% and 2% Common Carrier's Tax - Foreign Operator of Fleet of Vessels

April 27, 1979 BIR RULING NO. 023-79 Income tax of 2% and 2% common carrier's tax foreign operator of fleet of vessels This refers to your letter dated October 11, 1978 requesting confirmation of your opinion that your client, Smit-Lloyd B. V., is subject to 2-% tax on its gross Philippine billings and to the 2% common carrier's tax under Section 24 (b)(2) and 207 of the Tax Code of 1977, as amended. It is represented that your client is a foreign corporation organized under the laws of the Netherlands; that it operates a fleet of vessels which do not regularly call on Philippine ports; that all of said vessels are of foreign registry, being registered in the Netherlands, and are generally chartered principally to international oil companies and large drilling and construction firms to service the needs of their offshore drilling and construction activities; that your clients entered into a charter party contract to provide supply vessels to Philippine Cities Service Inc. which is presently engaged in petroleum exploration and development in the Philippines particularly offshore in Palawan. The activities of these vessels are as follows: "1. (missing words) Inc. principally from overseas ports to offshore platforms and drillings rig and to Mabini, Batangas which is the supply base of companies engaged in oil exploration and development and related activities. These supplies consist only of those items which are necessary to sustain an offshore petroleum exploration or production operation. Supplies include but are not limited to: food, water, fuel, bulk cement and drilling fluids, drilling and logging tools and equipment; and "2. Carrying personnel from overseas ports to offshore platforms and drillings rig and vice-versa." and that the above supply operations are conducted by your client between the waters of the Philippines and various overseas ports. In reply, I have the honor to inform you that under the above mentioned facts, your client is an international carrier, hence, it is subject to the income tax of 2-% on its gross Philippine billings and to the 2% common carrier's tax pursuant to Section 24(b) (2) and 207 of the Internal Revenue Code of 1977. The following ratios should be used for outbound plus inter-coastal operations: Number of days outbound plus Number of days consumed for intercoastal operation x monthly charter hire.