Exemption from Common Carriers Tax and the Corresponding Income Tax

September 8, 1989 BIR RULING NO. 194-89 25 (b) (3) 101 (a) & 115 401-87 194-89 S i r : This refers to your letter dated May, 1989 requesting a ruling on the following queries: "1. Whether or not a non-Philippine national, a fisherman by profession, is liable for the common carriers tax and the corresponding income tax, for regularly calling on Philippine ports in his fishing vessel to take delivery of his importations of fish and other marine products from a Philippine fishing concern? "2. What are the tax consequences to a Philippine corporation for entering into a bareboat charter contract of a foreign-registered fishing vessel with a non-Philippine entity? "3. Finally, what are the tax consequences to a Philippine corporation for its purchase of a foreign-registered fishing vessel from a non-Philippine national? In reply, please be informed as follows: 1. Since the said non-Philippine national will be carrying cargo solely for his own account and not cargo belonging to others, he is not subject to the 2-1/2% income tax on gross Philippine billings imposed by Section 24(b)(2)(i) of the Tax Code as he cannot derive income in carrying his own cargo. He cannot also be subject to the 3% common carrier's tax imposed by Section 115 of the same Code as he cannot be a carrier for his own cargo. (BIR Ruling No. 401-87) 2. The lessor (non-Philippine entity) of the foreign-registered vessel which lease or charter shall be approved by the Maritime Industry Authority is subject to the 4.5% final tax on the charter fees derived by said lessor, pursuant to Section 25(b)(3) in relation to Section 50(a), of the Tax Code, as amended. 3. Under Section 101(a) of the Tax Code, as amended, there shall be levied, assessed and collected on every importation of goods a value-added tax equivalent to 10% based on the total value used by the Bureau of Customs in determining tariff and customs duties, plus customs duties, excise taxes, if any and other charges, such tax to be paid by the importer prior to the release of such goods from customs custody. Accordingly, and since purchase by a Philippine corporation of a foreign-registered fishing vessel from a non-Philippine national constitutes importation, the same shall be subject to the 10% value-added tax. However, if the fishing vessel is a cargo vessel of more than 10,000 tons including engine and spare parts of the vessel, to be used by the importer himself as operator thereof, said importation is exempt from VAT. (Sec. 103(g) Tax Code) cdt Very truly yours, (SGD.) JOSE U. ONG Commissioner