Application for Relief from Double Taxation on Profits from Shipping Pursuant to the RP-Japan Tax Treaty

May 5, 1998 BIR RULING NO. 051-98 25 (a) (2)-000-00-51-98 Everett Steamship Corporation Rm. 701-702, B.F. Condominium Bldg. Cor. Andres Soriano Avenue and Solana St., Intramuros Manila Attention: Mr . Leonardo P . Valencia Executive Vice-President Gentlemen : This refers to your letters dated February 15, 1996 and August 14, 1996 requesting, on behalf of your principal, Apollo Shipping Company, Ltd ., approval of the application for relief from double taxation on profits from shipping pursuant to the RP-Japan Tax Treaty. It is presented that Apollo Shipping Co, Ltd. is a non-resident foreign corporation with address at Sanyo Bldg. 3-3 2-Chome, Kyobashi, Chou-Ku, Tokyo, 104, Japan; that its vessels regularly call at a Philippine port (Nasipit, Agusan del Norte) loading falcata bare core and veneer lumber for eventual discharge to Japan; and that Everett Steamship Corporation acts as its shipping agent in the Philippines, paying the 3% common carrier's tax and income tax at the rate of 2.5% on the latter's cargoes before the vessels' departure. In reply, please be informed that pursuant to Section 25(a)(2) of the Tax Code, as amended, international carriers doing business in the Philippines shall pay a tax of two and one-half percent (2-%) on their Gross Philippine Billings. However, Article 8(1) of the RP-Japan Tax Treaty provides, viz: "Article 8. (1) The profits of an enterprise of a Contracting State drived in the other Contacting State from the operation of ships or aircraft in international traffic may be taxed in that other Contracting State, but the tax so charged shall be sixty percent (60%) of the tax which is chargeable under the laws of that other Contracting State in force on the date of signature of this convention. LexLib xxx xxx xxx Such being the case, since Apollo Shipping Co., Ltd. is a non-resident Japanese shipping company operating in international traffic, the profits earned by it in the Philippines from the operation of ships shall be subject to a preferential tax rate of 1-% tax on Gross Philippine Billings or 60% pursuant to the aforequoted Tax Treaty provisions: This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue