Exemption from Philippine Income Tax

May 26, 1980 BIR RULING NO. 064-80 Messrs. Duavit, Gozon, Elma and Berenguer 3rd Floor, Asian Reinsurance Bldg. Legaspi Village, Makati Metro Manila Attention: Atty . Romulo D . San Juan Gentlemen : This refers to your letter dated January 30, 1978 requesting a ruling as to whether or not the amount to be remitted by your client, Mar Fishing Company, Inc. to B.C. Packers Limited, a foreign corporation domiciled in Vancouver, British Columbia, Canada, for services rendered in favor of the former is subject to tax. In reply, I have the honor to inform you that according to our investigation B.C. Packers rendered technical and international marketing services outside the Philippines for a period of three year beginning April 1, 1976, which services are of a specialized and complex nature. Accordingly, the compensation paid by your client for such services from April 1, 1976 to June 10, 1978 being income from sources without the Philippines [(Sec. 37(c)(3), Tax Code of 1977, as amended)], is not subject to Philippine income tax. However, beginning June 11, 1978, date of effectivity of P.D. No. 1457, said compensation is subject to Philippine income tax and consequently to the 35% withholding tax prescribed by Section 24 (b)(1) in relation to Section 23 (b)(2) of the Tax Code of 1977, as amended, since the compensation is considered royalty for "technical advice, assistance or services rendered in connection with technical management or administration of any scientific, industrial or commercial undertaking, venture, project or scheme." (Sec. 37(a)(4)(F), Tax Code of 1977, as amended by P.D. No. 1457 and Batas Pambansa Blg. 41) Very truly yours, RUBEN B. ANCHETA Acting Commissioner