Exemption from the 10% Overseas Communication Tax

July 24, 1990 BIR RULING NO. 139-90 118 (b) 189-81 139-90 Gentlemen : This refers to your letter dated November 28, 1989 requesting a ruling as to whether or not Philippine Airlines (PAL) is subject to the 10% overseas communication tax. In reply, please be informed that Section 118(b)(i) of the Tax Code, as amended, provides that the 10% overseas communication tax shall not apply, among others to amounts paid for messages transmitted by the Government of the Republic of the Philippines or any of its political subdivisions or instrumentalities. Accordingly, under BIR Ruling No. 189-81 dated September 30, 1981, this Office has ruled that since PAL is owned, controlled and managed by the Philippine Government, it is exempted from the 10% overseas communication tax. Moreover, in a letter of the Executive Secretary to PAL dated March 10, 1988, it was clarified that Executive Order No. 72 imposing income tax on franchiseholders and Executive Order No. 93, withdrawing, subject to certain exemption, the tax exemption granted to government/private entities, did not modify or amend the aforesaid preferential tax treatment/exemption of PAL. Such being the case, you need not collect from PAL said tax for remittance to this Office. cdt Very truly yours, (SGD.) JOSE U. ONG Commissioner