Final Withholding Tax of 4.5% — Monthly Rentals to a Foreign Shipowner

January 29, 1981 BIR RULING NO. 023-81 24-b-v 110-79 023-81 Baliwag Navigation, Inc. Suites 300-303 Katigbak Bldg. 1011 A. Mabini Street Ermita, Metro Manila Attention: Mr . Arsenio Benjamin Santos Managing Director Gentlemen : This refers to your letter dated January 8, 1981 requesting a ruling on the rate of withholding tax to be imposed on the monthly rentals payable by you to a foreign shipowner. You have represented that as a domestic corporation engaged in shipping business, you have chartered a foreign ocean going vessel under a bareboat charter agreement with Jesty PTE, Limited, a Singaporean company, for a period of four (4) years, at a monthly rental of $80,000; that after securing approval of the Maritime Industry Navigation Authority (MARINA) you registered the vessel "M/V Manila Mariner" under the Philippine Flag, in accordance with Presidential Decree No. 760, as amended by P.D. No. 866. cdta In reply, I have the honor to inform you that rentals for chartered vessels are not among those items of income expressly mentioned in the Convention between the Republic of the Philippines and the Republic of Singapore for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to taxes on income. Article 8 of said Convention dealing on profits derived from the operation of ships or aircrafts is not applicable to the above transaction. Such being the case, the said rentals payable by you are subject to the final withholding tax of 4.5% prescribed under Section 24(b)(v), in relation to Sections 53 and 54, all of the Tax Code of 1977, as amended. Very truly yours, RUBEN B. ANCHETA Acting Commissioner