Request for Exemption from Philippine Income Tax of Professional Fees for Technical Services of Consultants from Singapore

June 24, 1986 BIR RULING NO. 088-86 24-b 077-84 088-86 Gentlemen : This refers to your letter dated March 26, 1986 requesting that professional fees to be paid for technical services of consultants from Singapore be exempt from Philippine income tax pursuant to Article 14(2)(a) of the RP-Singapore Tax Treaty. It is represented that your company, Abbott Laboratories (Philippines) has arranged with a certain consultant the Centre of Information Resource and Technology, Singapore (CIRTS) to conduct a 5-day seminar in Management Resource Planning (MRP II) to about thirty (30) of your employees; that the said CIRTS Consultant is mainly involved with Manufacturing Management Consultation; that you have a pending request for approval with the Central Bank of the Philippines for foreign exchange outlay of US$9,643.00 to cover instruction fees and incidental expenses for the said 5-day seminar on MRP II to be conducted by CIRTS Consultants; that your estimated exchange outflow for which you are requesting approval is as follows: Seminar fees (S$13,800 / 2.1) US$6,591; materials (S$40 / 2.1 * 80) US$572; Air passage US$2,500; that the breakdown of the seminar fee of S$18,800.00 consists of: instruction fees of S$800 per hour teaching time for 5 days of 7 hours per day or S$10,500.00 rental of video tapes of S$300 per tape or 11 tapes of US$3,800.00; that the payment of foreign exchange will be made directly to CIRTS, and none will be paid to the employees or consultants who will be coming from Singapore. In reply, please be informed that Article 5 of the RP-Singapore Tax Treaty provides that the term "permanent establishment' includes "the furnishing of services, including consultancy services, by a resident of one of the Contracting States, through employees or other personnel, provided activities of that nature continue (for the same or connected project) within the other Contracting State for a period or periods aggregating more than 183 days." Since CIRTS will provide consultancy services for a period less than 183 days, it is deemed not to be engaged in business in the Philippines by providing services through a permanent establishment (Article 5 in relation to Article 7 of the RP-Singapore Tax Treaty). Such being the case, consultancy service fees to be paid and remitted by Abbott Laboratories to the Centre of Information Resource and Technology Singapore, are exempt from Philippine income tax. aisadc Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner