Tax Liability of Foreign Steamship Company Whose Vessels Touch Philippine Ports

February 26, 1958 BIR RULING NO. 131-58 Mr. Guillermo B. Blanco Attorney-at-Law 1 Cadorna, Mandaluyong, Rizal S i r : Reference is made to your letter dated February 20, 1958, stating the following: cdti "A client of mine, a domestic corporation, is negotiating with a foreign steamship company to open an agency in the Philippines with said domestic corporation as its general agent in this country. Before it opens a local agency, said foreign steamship company desires to be informed of the requirements of the Philippine internal revenue law and regulations and of what Philippine internal revenue taxes it shall pay should its vessels touch Philippine ports. "I informed my client that in accordance with the ruling contained in the memorandum of the Chief Counsel dated December 24, 1957, approved by the Commissioner of Internal revenue, every foreign steamship company whose vessels touch Philippine ports should register with the Bureau of Internal Revenue, pursuant to Section 203 of the National Internal Revenue Code, stating also the name and address of its agent in this country. This registration may be made by its agent in the Philippines, who shall execute and accomplish said registration on B.I.R. Form No. 19.53. "The said foreign shipping company, as transportation contractor, shall be subject to fixed annual tax of P20.00 imposed by the first paragraph of Section 182 of the National Internal Revenue Code and to a percentage tax of 2% of the gross receipts from all outgoing freight of passengers, as prescribed in Section 192 of the Tax Code. It shall likewise be subject to the basic annual residence tax (class C-1) of P5,000 and to an annual additional residence tax (class C-1) which, in no case shall exceed two thousand pesos, computed at the rate of P2.00 for every P5,000 worth of real property in the Philippines owned by it during the preceding year and P2.00 for every P5,000 of gross receipts earnings derived by it from its business in the Philippines during the preceding year, in accordance with Section 2 of Commonwealth Act No. 465, as amended, otherwise known as the Residence Tax Law. If the foreign shipping company does not own any real property in the Philippines, then the annual additional residence tax (Class C-1) shall be computed as the basis of its gross receipts from all outgoing freight and passengers. "Aside from the transportation contractor's fixed and percentage taxes and the basis and additional residence taxes, the said foreign steamship company shall likewise be subject to the income tax prescribed by Title II (Income Tax) of the National Internal Revenue Code, and to the requirements of said title as regards the filing of income tax returns and the payment of the income tax. In accordance with the aforementioned ruling contained in the aforesaid memorandum of the Chief Counsel, dated December 24, 1957, approved by the Commissioner of Internal Revenue, (1) the gross income and allowable deductions of a foreign steamship company whose vessels touch Philippine ports shall be determined in accordance with Section 163 of Revenue Regulations No. 2, and (2) the Bureau of Internal Revenue shall only consider statements of world operations of the foreign steamship company duly certified by the tax authorities of its government or, if the same are not available, financial statements certified by independent certified public accountants, and in both cases, the statements must be authenticated by Philippine consular or foreign affairs officials; but in the absence thereof, only verified Philippine deduction shall be allowed. "Aside from the foregoing requirements, the agent in the Philippines of said foreign steamship company shall keep the books of accounts and other records required by Revenue Regulations No. V-1, otherwise known as the Bookkeeping Regulations, of the business conducted or transacted in the Philippines by its principal." You now request confirmation from this Office of the foregoing information. In reply thereto, I have the honor to inform you that foreign steamship company whose vessels touch Philippine ports are subject only to the abovementioned internal revenue taxes, namely, (1) the transportation contractor's fixed and percentage taxes; (2) the basic and additional residence taxes; and (3) the income tax. Moreover, the said company is required to keep books of accounts and other records under the Bookkeeping Regulations and to register with the Bureau of Internal Revenue, pursuant to Section 203 of the Tax Code as stated above. llcd Very truly yours, (SGD.) JOSE ARAAS Commissioner of Internal Revenue