BIR Ruling No. 133-84

July 31, 1984 BIR RULING NO. 133-84 24-b-000-00-133-84 Gentlemen : This refers to your letter dated June 7, 1984 requesting confirmation of the 1% reduction in the 2% International Carriers tax under Section 24 of the National Internal Revenue Code on a company based in Oslo, Norway which owns/manages vessels flying flags of different nationalities. It is represented that Philippine Transmarine Carriers Inc. is an agent of a company based in Oslo, Norway which owns/manages vessels flying flags of United Kingdom of Great Britain, Norway, France and HongKong and that these vessels call and load in Philippine Ports. In reply thereto, please be informed that the Philippines has no tax treaties with Norway and HongKong. It has treaties only with the United Kingdom and France. The RP-United Kingdom Tax Treaty has no provision on shipping. Under RP-France Tax Treaty, Article 8 par. 2 and Article 3 par. 1(c) thereof provide: "(2) Notwithstanding the provisions of paragraph 1, profits from sources within a Contracting State derived by an enterprise of the other Contracting State from the operation of ships or aircraft in international traffic may be taxed in the first-mentioned State but the tax so charged shall not exceed the lesser of: a) one and one-half percent of the gross revenues derived from sources in the first-mentioned State; and b) the lowest rate of Philippine tax imposed on such profits derived by an enterprise of third State. "(c) the terms "enterprise of a Contracting State" and "enterprise of the other Contracting State" means respectively an enterprise carried on by a resident of the other Contracting State." Wherefore, with respect to vessels flying flag of France, the company based in Oslo, Norway cannot avail of the reduced rate under the RP-France Tax Treaty because the enterprise is carried on not by a resident of France. It is thus subject to 2% international carriers tax on its gross Philippine billings pursuant to Article 24 (b)(2)(i) of the Philippine National Internal Revenue Code. With respect to vessel flying flags of United Kingdom, Norway and HongKong, the said company based in Norway cannot avail of the 1% reduced rate because they are carried on by resident of that country with whom the Philippines has no tax treaty. cdta Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner