10% Overseas Communications Tax — EBASCO

July 24, 1981 BIR RULING NO. 123-81 290-A 000-00 123-81 The National Power Corporation Bonifacio Drive, Port Area Metro Manila Attention: Mr . Gabriel Y . Itchon President Gentlemen : This refers to your letter dated January 5, 1981 to the Minister of Finance thru this Bureau, requesting exemption for and in behalf of EBASCO OVERSEAS CORPORATION (EBASCO) from the 10% overseas communications tax under Section 8(b) of R.A. No. 6395 (NPC Charter) as amended by Presidential Decree No. 1360, which provides: "(b) The loans, credits and indebtedness contracted under this subsection and the payment of the principal, interest and other charges thereon, as well as the importation of machinery, equipment, materials, supplies and services, by the Corporation, paid from the proceeds of any loan, credit or indebtedness incurred under this Act, shall also be exempt from all direct and indirect taxes, fees, imposts, other charges and restrictions, including impost restrictions previously and presently imposed, and to be imposed by the Republic of the Philippines, or any of its agencies and political subdivisions." It is represented that on September 3, 1974, the National Power Corporation entered into a contract with Ebasco Overseas Corporation for engineering and consulting services for the NPC Philippine Nuclear Power Project-I (PNPP) at Bataan; that this project is financed by foreign loans (Citicorp and Eximbank); that it was stipulated in the contract with Ebasco that NPC will secure the necessary exemption for the contractor from the payment of all kinds of income and corporate taxes, duties, compulsory saving, stamp and documentary taxes, and all other taxes and charges of any nature whatsoever imposed by the government of the Philippines or any agency or instrumentalities thereof; that the services of EBASCO in the prosecution of its consultancy contract with NPC are paid out of the foreign loans contracted by NPC for funding the importation of nuclear equipment and construction cost of the Philippine Nuclear Power Project-I; and that the ten percent (10%) tax imposed on the overseas communication of EBASCO would be an indirect tax on the proceeds of said foreign loans contracted by NPC. In reply, please be informed that Section 290-A(b) of the Tax Code, as amended, states that the 10% overseas communications tax shall not apply to (1) Government, (2) Diplomatic services, (3) International organizations, and (4) News Services. This means that only those enumerated are exempt from said tax; otherwise, there would be no need for said enumeration. Accordingly, since EBASCO is not one of those included in the said enumeration, it is not exempt from the 10% overseas communications tax. aisadc Very truly yours, RUBEN B. ANCHETA Acting Commissioner