BIR Ruling No. 213-82

July 13, 1982 BIR RULING NO. 213-82 024 00-000 212-82 Messrs. Guerrero & Torres 638 Philbanking Bldg., Ayala Avenue, Makati Metro Manila Attention: Atty . Vicente A . Torres Philippine Counsel Air Canada Gentlemen : This refers to your letter dated November 23, 1981 requesting confirmation of your opinion to the effect that Air Canada is subject to the preferential tax rate of 1 % of gross revenue it derives from Philippine sources and that the total tax incidence (inclusive of corporate income tax and branch remittance tax) which may be imposed by the Philippines on Air Canada for its revenue derived from Philippine sources shall not exceed 1 % of such gross revenue. It is represented that Air Canada is a corporation organized and existing under the laws of Canada; that it is engaged in international air carriage; that it was authorized by the Civil Aeronautics Board on January 4, 1981 to operate as an off-line carrier in the Philippines; and that the company sells passage tickets in the Philippines through a general sales agent, Rocha y Cia. In reply thereto, I have the honor to inform you that Article VIII of the Convention between the Philippines and Canada for the avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to taxes on income provides, viz.: cdtech "Article VIII Shipping and Air Transport "1. Profits derived by an enterprises of a Contracting State from the operation of ships or aircraft shall be taxable only in that State. "2. Notwithstanding the provisions of paragraph 1, profits from sources within a Contracting State derived by an enterprise of the other Contracting State from the operation of ships or aircraft in international traffic may be taxed in the first-mentioned State but the tax so charged shall not exceed the lesser of: (a) one and one-half per cent of the gross revenues derived from sources in that State; and (b) the lowest rate of Philippine tax imposed on such profits derived by an enterprise of a third State." In view thereof, Air Canada is subject only to 1 % of the gross revenues derived from Philippine sources and that the total amount of corporate income tax and branch profit remittance tax that may be imposed by the Philippines on profits of ship and aircrafts of Canadian nationality shall not exceed 1 % of gross revenue derived from Philippine sources. cdt Very truly yours, RUBEN B. ANCHETA Acting Commissioner