Situs of Income of Time Magazine

May 28, 1990 BIR RULING NO. 099-90 25 (b) (1) 000-00 099-90 Gentlemen : This refers to BIR Ruling No. 18-80 dated September 30, 1980 to the effect that income derived from the purchase and sale of personal property, like the Time Magazine is income derived from the place in which it is sold; that the perfection as well as the consummation of the sale took place abroad; that the acceptance or rejection of the subscription order is made in Tokyo, Japan; that title over the subscription copies passed to the Philippine subscriber abroad from the moment they were posted in the HongKong Post Office by Time Inc. (HongKong branch) pre-addressed to the Philippine subscriber; that inasmuch as the sale of the subscription copies of the Time Magazine took place abroad, the income derived by Time, Inc. from the sale thereof to Philippine subscribers is deemed income from sources without the Philippines not subject to Philippine income tax and consequently not also subject to the 35% withholding tax prescribed by then Section 53(b) (2) of the Tax Code. cdtech In connection thereto, please be informed that after a restudy of the above ruling, this Office finds the same devoid of legal basis. 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 filling up of the subscription form by the Philippine subscriber to the Time 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, Time, Inc. 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 filling 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 has to be, as it is hereby revoked. The subscription payments for the Time Magazine 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. Very truly yours, (SGD.) JOSE U. ONG Commissioner