BIR Ruling No. 115-82

April 15, 1982 BIR RULING NO. 115-82 24-b-v 23-81 115-82 Maritime Industry Authority PPL Building, United Nations Ave. M a n i l a Attention: Mr . T . P . Ventura, Jr . Director Overseas Shipping Office Gentlemen : This refers to your letter dated June 3, 1981 inquiring whether Article 8 of the Convention between the Republic of the Philippines and the Republic of Singapore for the avoidance of Double Taxation and the Prevention of Fiscal Evasion has the net effect of reducing the withholding tax on gross hire/charter fees payable by Filipinos who bareboat charter Singapore flag vessels. cdta In reply, please be informed that our answer is in the negative. Article 8 of the abovesaid Philippine Singapore Tax Treaty reads: "1. Profits from sources within a Contracting State derived by an enterprise of the other Contracting State from the operation of ships or aircrafts in the international traffic, may be taxed in the first-mentioned state but the tax so charged shall not exceed whichever is the lesser of either: "(a) one and one-half per cent of the gross revenue derived from source in that State; or "(b) the lowest rate of Philippine tax that may be imposed on profits of the same kind derived under similar circumstances by a resident of a third state. "2. The provisions of paragraph 1 shall not apply to profits derived from the participation in a pool, a joint business or in an international operating agency." Obviously, the aforequoted provision speaks of the taxation at lower rates of profits derived from the operation of ships and aircrafts on the international traffic by either Philippine or Singaporean corporations, not of rental, gross hire, fees or items of payments or receipts for charter of vessels. Consequently, Article 8 can not be said to have reduced the withholding tax on charter fees payable by Filipinos who bareboat charter Singaporean ships. Such being the case, the rentals for chartered vessels payable to a Singaporean shipping operator are subject to the final withholding tax of 4.5% prescribed under Section 24(b)(v), in relation to Sections 53 and 54, all of the Tax Code of 1977, as amended. cdti Very truly yours, RUBEN B. ANCHETA Acting Commissioner