Freight Collection in the Philippines by Foreign Airlines and Shipping Companies are Not Subject to Value-Added Tax

September 4, 1995 BIR RULING NO. 134-95 25 (a) (b) 000-00 134-95 Madrigal-Wan Hai Lines Knights of Rizal Building, Bonifacio Drive, Port Area Metro Manila Attention: Ms . Rose Marie C . Chan AVP-Finance Gentlemen : In reply to your letter dated July 4, 1995, please be informed that freight collection in the Philippines by foreign airlines and shipping companies are not subject to value-added tax. However, foreign international carriers doing business in the Philippines are subject to an income tax of 2.5% based on their Gross Philippine Billings. Gross Philippine Billings means, gross revenue realized from uplifts of passengers anywhere in the world and excess baggage, cargo and mail originating from the Philippines, covered by passage documents sold in the Philippines: Provided, That documents sold outside the Philippines under a "prepaid ticket advice" scheme for passengers originating from the Philippines shall be considered as documents sold in the Philippines. Gross revenue from chartered flights originating from the Philippines shall likewise form part of the "Gross Philippine Billings" regardless of the place of sale of payment of the passage documents. For purposes of determining the taxability of revenues from chartered flights, the term "originating from the Philippines" shall include flights of passengers who stay in the Philippines for more than forty-eight (48) hours prior to embarkation. cdtech Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue