BIR Ruling No. 212-82

July 8, 1982 BIR RULING NO. 212-82 024 000-00 212-82 Messrs. Guerrero & Torres 638 Philbanking Bldg., Ayala Avenue, Makati Metro Manila Attention: Atty . Rafael E . Evangelista Gentlemen : This refers to your letter dated February 4, 1980 requesting confirmation of your opinion to the effect that the reimbursement made by Total Exploration S.A. (Total) in favor of your client, Japan Drilling Co., Ltd. (JDC) of the expenses incurred in the mobilization of its drilling rig "Hakuryu IV" in accordance with a contract executed by them is not subject to the 8% final tax. Investigation of this case disclosed that Total, a service contractor engaged in petroleum operations in the Philippines entered into a contract with JDC on September 23, 1979 for the use of its drilling rig "Hakuryu IV" in its petroleum operations in the permit area; that in full consideration of JDC's entire performance of the operation contracted for, Total shall pay JDC the rates and fees fixed in Article 10 of the contract; and that the mobilization fee of U.S. $600,000.00 is part of the remuneration of JDC under the aforesaid contract. In reply thereto, I have the honor to inform you that every sub-contractor whether domestic or foreign entering into a contract with a service contractor engaged in petroleum operations in the Philippines shall be liable to a final income tax equivalent to eight percent (8%) of its gross income derived from such contract, such tax to be in lieu of any and all taxes whether national or local pursuant to Section 1 of Presidential Decree No. 1354. Considering that the mobilization fee in the amount of U.S. $600,000.00 is expressly provide for as part of the remuneration of JDC for the entire performance of the operations contracted for, the mobilization fee incurred by JDC is subject to the 8% final income tax. cdti Very truly yours, RUBEN B. ANCHETA Acting Commissioner