Correct Taxable Portion of an Airline Ticket sold in the Philippines

April 27, 1988 BIR RULING NO. 164-88 115 000-00 164-88 S i r : This refers to your letter dated February 9, 1988 requesting for a definitive ruling regarding the correct taxable portion of an airline ticket sold in the Philippines under the following circumstances: cdta 1. A passage ticket up to the point of final destination (say the U.S.A. or Europe or the Middle East) is sold and paid for by a passenger originating from Manila; 2. The passenger will embark in Manila and will disembark (as a transit passenger) either in Tokyo or Bangkok or Singapore or HongKong; 3. The passenger will embark on another plane belonging to the same airline in Tokyo or Bangkok or Singapore or HongKong for the U.S.A. or Europe or the Middle East; 4. All arrangements are done by the selling airlines' Manila Office. A seat is reserved in advance for the passenger on the connecting plane leaving Tokyo or Bangkok or Singapore or HongKong bound for the U.S.A. or Europe or the Middle East; 5. Normally, two (2) boarding passes are issued to be passenger in Manila. One for the flight from Manila to Tokyo or Bangkok or Singapore or HongKong, and the other for the flight from Tokyo or Bangkok or Singapore or HongKong to the U.S.A. or Europe or the Middle East. In BIR Ruling No. 015-88 dated February 1, 1988 which was issued in response to your letter of December 28, 1987, this Office ruled that if there is a change in plane for any reason other than force majeure , there is no longer a "continuous and uninterrupted flight"; hence, the taxable gross receipts shall consist only to those corresponding to that portion of the flight from the Philippines to the point of change in plane. In this connection, please be informed that after a careful restudy of said BIR Ruling No. 015-88 and taking into account the actual practice of airline companies, this Office finds the provisions of Revenue Regulations No. 6-66 under which said ruling is based as obsolete, and, therefore, has finally decided to revoke the same. Accordingly, based on the facts presented by you, the total gross receipts for the entire journey from the point of uplift to the point of final destination shall be the correct taxable receipts for purposes of the 3% common carrier's tax. In other words, if there is a change in plane belonging to the same airline at a certain point which is not the final destination of the passenger, for any reason other than force majeure, the flight is still "continuous and uninterrupted"; hence, the basis of the gross receipts reportable for percentage tax purposes will be the cost of the ticket corresponding from the point of origin (Manila) to the final destination of the passenger. Moreover, BIR Ruling No. 015-88 being erroneous, cannot be the basis of a claim for tax credit or refund. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner