BIR Ruling No. 137-65

December 28, 1965 BIR RULING NO. 137-65 Capt. Hilario M. Ruiz Chief of Naval Logistics Philippine Navy Headquarters Roxas Boulevard, Manila S i r : This refers to your letter dated September 9, 1965, requesting reconsideration of BIR Ruling No. 65-089 to the effect that interest earning of the shipyard on deferred payments are subject to the 30% withholding income tax under the provisions of Section 54 in relation to Section 53, both of the Tax Code. The aforesaid ruling was issued in connection with the "Contract of Sale" for two(2) hydrofoil boats executed between the Shipyard Leopoldo Rodriguez in Messina, Italy and the Republic of the Philippines represented by the Chief of Staff, AFP. In reply thereto, I have the honor to inform you that, after re-examination of the provisions of the aforesaid "Contract of Sale", this office is convinced that, in view of the fact that the Philippine Navy being a government agency is not liable for tax, and that under Article 12 of the agreement reading "All Philippine taxes, duties, contractual expenses and bank commissions relating to the hydrofoil boats sold are for the exclusive account of the PURCHASER, who must reimburse them upon request of the SHIPYARD, if for any reason whatsoever the SHIPYARD should be forced to pay them." the Philippine Navy will absorb all the tax liabilities that will be levied against the supplier, the Philippine Navy may be granted exemption from the payment of the 30% withholding tax notwithstanding the fact that the tax on such interest income is the direct and personal liability of the firm Shipyard, a non-resident foreign corporation not engaged in trade or business within the Philippines. cdtech This ruling revokes BIR Ruling No. 65-089 dated August 12, 1965. Very truly yours, (SGD.) MISAEL P. VERA Acting Commissioner of Internal Revenue