Exemption from the Payment of All Licenses, Fees, Percentages, Excise or Other Taxes

March 31, 1989 BIR RULING NO. 054-89 Article XVIII RP-US Military Base 054-89 Gentlemen : This refers to your letter dated January 19, 1989 requesting confirmation of your opinion that PHILCOMSAT is exempt from the payment of all licenses, fees, percentages, excise or other taxes such as franchise tax on its gross receipts derived from a concession inside the U.S. Military Bases at Clark Air Base, Dau, Pampanga. cdta It appears that PHILCOMSAT is a grantee of a legislative franchise under Republic Act No. 5541 to establish, construct, maintain and operate ground satellite terminal stations or stations for international satellite communications; and that PHILCOMSAT has an existing TVRO (Television Receive Only) satellite facilities at Clark Air Force Base whose purpose is to link the U.S. Forces in the Philippines with satellite network for the American Forces Radio-Television Service thereby providing current television entertainment, sports and news programming exclusively for the use of the U.S. Forces personnel and their families. In reply, please be informed that under Article XVIII of the RP-US Military Bases Agreement stating "Article XVIII SALES AND SERVICES WITHIN THE BASES : "1. It is mutually agreed that the United States shall have the right to establish on bases, free for all licenses; fees; sales, excise and other taxes, or imposts; Government agencies, including concessions, such as sales commissaries and post exchanges, messes and social clubs, for the exclusive use of the United States Military forces and authorized civilian personnel and their families. The merchandise or services sold or dispensed by such agencies shall be free of all taxes, duties and inspection by the Philippine authorities. . . ." a company rendering services inside a U.S. Military Base by virtue of a contract with Base Authorities is exempt from taxes. (Araneta vs. Manila Pencil Co., G.R. No. L-8182, June 29, 1957; BIR ruling Nos. 112-81 and 162-82) Such being the case, PHILCOMSAT is exempt from the payment of franchise tax on gross receipts derived from its telecommunication service i.e. satellite network for radio-television service, within the U.S. Bases, pursuant to the RP-US Military Bases Agreement. However, it shall remain subject to income tax on income from its services within the U.S. Bases, pursuant to Section 2, of Executive Order No. 72, amending Section 227, now Section 117 of the NIRC, as amended. Very truly yours, (SGD.) JOSE U. ONG Commissioner