BIR Ruling No. 059-83
BIR Ruling No. 059-83 • Bureau of Internal Revenue (BIR) Issuances • Rulings (Numbered) • Apr 14, 1983
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April 14, 1983 BIR RULING NO. 059-83 Gentlemen : This refers to your letter dated March 4, 1983 requesting confirmation that the management/establishment and labor charges payable by your company to R.B. Hilton, Ltd. is not subject to the Philippine income tax and therefore exempt from withholding tax. cdtech It is represented that your company operates a crude oil refinery in Tabangao, Batangas City; that you engaged the services of R.B. Hilton, Ltd. a company based in London to undertake refractory repairs of the refinery's furnace walls; that the R.B. Hilton, Ltd. technicians have completed the refractory repair work in a little over a month employing a total of 1,000 man-hours; that the amount of 9,250 and 16,678 representing management/establishment charges and labour charges will be remitted by your company to R.B. Hilton's account abroad. In reply, please be informed that under Article 7 of the RP-UK tax treaty, a UK corporation is taxable in the Philippines if it carries on business through a permanent establishment situated in this country. Article 5 of the same tax treaty provides, that a UK corporation is considered to have a permanent establishment in the Philippines if "it furnishes services, including consultancy services, in that other Contracting State through its employee or other personnel (other than agents of an independent status within the meaning of paragraph (7) of this Article) for a period exceeding in the aggregate 183 days within any twelve month period. [Art. 5, 3(b)] In the instant case, R.B. Hilton, Ltd. furnished its services in the Philippines through its employees for a period of less than 183 days. Such being the case, it had no permanent establishment in the Philippines and, therefore, it is not subject to Philippine income tax. With respect to the technicians of the R.B. Hilton, Ltd., since their stay in the Philippines was less than 183 days their income for the services rendered in the Philippines are, likewise, exempt from Philippine income tax under Article 14 of the said RP-UK tax treaty. Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner Bureau of Internal Revenue
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