Tax on Franchise Granted to Philippine Air Lines, Inc.

February 21, 1958 BIR RULING NO. 134-58 The Philippine Air lines, Inc. M.R.S. Building Plaza Cervantes, Manila Gentlemen : Reference is made to your letter of January 22, 1958, requesting information on the following: prcd "Sometime after the start of our post-war operations, we were permitted by the Insurance Commissioner to act as sub-agents of Soriano & Co., who in turn were and still are general agents of Commonwealth Insurance Company. As such, we are authorized to sell travel accident insurance coupons to our passengers on commission basis. "The gross revenue from sales of said coupons are remitted to Soriano & Co., who upon receipt return to us our corresponding share of the commission. These commissions are entered in our books as incidental income. "Since we pay franchise tax on our gross revenue we are as per our franchise provision exempted from all our taxes except realty taxes. It would seem unnecessary for us therefore, to pay the annual privilege tax as insurance sub-agent of Soriano & Co." As the franchise granted to you under Act No. 4271 is limited to the business of common carrier by air, necessarily, the provision in Section 13 of said Act which states that the franchise tax prescribed therein shall be in lieu of all other taxes, except realty taxes, cannot be made to comprehend other taxes due on your other business, which is that of insurance sub-agent. Accordingly, and as the occupation tax is a tax on natural and not on artificial persons, such as corporations, although the Philippine Air Lines, Inc. is not itself subject to the occupation tax as an insurance sub-agent, the employees and/or officials thereof who actually perform the work of insurance sub-agents are subject to said tax. In this connection, it may be stated that you need not declare the commission being earned by that corporation, for purposes of the franchise tax or any other percentage tax. LLpr Very truly yours, (SGD.) JOSE ARAAS Commissioner of Internal Revenue