Situs of Income of Newsweek Magazine

May 28, 1990 BIR RULING NO. 094-90 25 (b) 000-00 094-90 Gentlemen : This refers to BIR Ruling No. 557-88 dated November 24, 1988 to the effect that since the printing and publication of the Newsweek Magazine is done in HongKong, there is labor or personal service done abroad; hence, the income derived therefrom by the foreign publisher Newsweek, Inc. (HongKong branch) is considered income from sources without the Philippines [Sec. 36(c)(3) Tax Code] which is not subject to the Philippine income tax and consequently, not also subject to the 35% withholding tax prescribed by Section 25(b)(1) of the Tax Code, in relation to Section 50(a) of the same Code. cdtech In connection thereto, please be informed that after a re-study of the above ruling, this Office finds the same devoid of legal basis. The source of an income is the property, activity or service that produced the income. For the source of income to be considered as coming from the Philippines, it is sufficient that the income is derived from an activity within the Philippines. (Commissioner vs. British Overseas Airways Corporation (BOAC) and Court of Tax Appeals, G.R. Nos. 65773-74, April 30, 1987) Thus, the filing up of the subscription form by the Philippine subscribers to the Newsweek Magazine is the activity that produced the income consisting of the subscription payments. Since the subscription payments were made here and therefore came from the Philippines, the source of the income is this country. The word "source" conveys one essential idea, that of origin, and the origin of the income herein is the Philippines. (Commissioner vs. British Overseas Airways Corp. (BOAC) and CTA, supra, citing Manila Gas Corp. vs. Collector, 62 Phil. 895) The fact that the foreign publisher, Newsweek, Inc. (HongKong branch) printed and published the magazine in HongKong, does not determine the source of income and the situs of Philippine taxation. Said BOAC case citing Howden & Co. Ltd., vs. Collector, 13 SCRA 601, said that the test of the taxability is the "source" and the source of an income is that activity which produced the income. As heretofore stated, the activity that produced the income is the filing up of the subscription form by the Philippine subscriber, as well as the payments for subscription also in the Philippines. In view thereof, the above ruling insofar as the income derived from the Philippines by the said foreign publisher is concerned consisting of the subscription payments by Philippine subscribers, has to be, as it is hereby revoked/modified. The subscription payments for the Newsweek magazines by Philippine subscribers are considered Philippine source income; hence, subject to Philippine income tax and consequently to the 35% withholding tax prescribed by Section 25(b)(1) of the Tax Code in relation to Sections 50(a) and 51 of the same Code. casia Very truly yours, (SGD.) JOSE U. ONG Commissioner