British Ocean-Going Vessels and Airline Companies Conducting Business in the Philippines Subject to 3% Percentage Tax

September 30, 1985 BIR RULING NO. 172-85 207 000-00 172-85 S i r : This refers to your letter dated December 18, 1984 requesting clarification on whether the percentage tax imposed by Section 207 of the Tax Code on land, sea and air transportation companies which has been increased from 2% to 3% under P.D. No. 1959, is covered by the RP-UK Tax Treaty. In reply, please be informed that said increased rate of percentage tax which is imposed on all common carriers doing business in the Philippines, is not covered by the RP-UK Tax Treaty, because it is a tax on business and not on income. Hence, British ocean going vessels and airline companies which conduct business in the Philippines, are subject to said 3% tax based on their gross receipts derived from outgoing freight and passenger services. cdt Furthermore, the 2-1/2% income tax on gross Philippine billings imposed on international carriers by Section 24(b)(1) of the National Internal Revenue Code is expressly excluded from the coverage of the said Tax Treaty. Art. 2(1) thereof provides as follows: "(1) The taxes which are the subject of this Convention are: (a) . . .; (b) in the Philippines : The income tax imposed by the Government of the Republic of the Philippines except the tax on gross billing in respect of international carriers . (Section 24, paragraph (b), sub-paragraph (2) National Internal Revenue Code)." Such being the case, British ocean going vessels and airline companies being international carriers are subject to the 2-1/2% income tax on gross Philippine billings; and the 3% common carrier's tax, both under the National Internal Revenue Code of the Philippines. cd Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner