Tax Liability Arising the Involvement in the Construction of the Philippine Cultural Center of Nichiren Shoshu

May 14, 1987 BIR RULING NO. 129-87 25 (b) 000-00 129-87 Gentlemen : This refers to your letter dated May 5, 1987 requesting information whether you are subject to any tax liability arising from your involvement in the construction of the Philippine Cultural Center of Nichiren Shoshu of the Philippines in Quezon City. It is represented that Nichiren Shoshu International Center of Japan and Nichiren Shoshu of the Philippines have engaged Hazama-Gumi Ltd. of Japan for the construction of the Philippine Cultural Center in Quezon City, that Hazama-Gumi will sub-contract to Fukui Construction Co., Ltd. of Japan which will, in turn, sub-contract to Asian Construction and Development of the Philippines which will undertake the actual construction of the proposed cultural center, and that Hazama-Gumi Ltd. of Japan has applied with the Board of Investments for the establishment of a branch office in the Philippines. In reply, I have the honor to inform you that under the foregoing facts, you are not engaged in trade or business in the Philippines, hence, you are not subject to any internal revenue tax on business. Moreover, "the profits of an enterprise of a Contracting State shall be taxable only in the Contracting State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein." (Art. 7(1), RP-Japan Tax Treaty) From the foregoing facts, and since Asian Construction and Development of the Philippines is the party actually undertaking the construction of the project for a period of 245 days, you are not considered to have carried on business in the Philippines through a permanent establishment situated in the Philippines as contemplated in Article 5 of the RP-Japan Tax Treaty. Consequently, the profit derived by you in the above construction project is not subject to Philippine income tax. Very truly yours, (SGD.) EUFRACIO D. SANTOS Deputy Commissioner