Whether Remittances Received by Asiaweek Ltd. from Advertisers in the Philippines Are Subject to Income Tax

December 23, 1985 BIR RULING NO. 219-85 37-c 000-78 219-85 Gentlemen : This refers to your letter dated August 6, 1985 requesting a ruling as to whether or not the remittances received by your client, Asiaweek Limited from advertisers in the Philippines for advertising space in its "Asiaweek" magazine, is subject to income tax. It is represented that Asiaweek Limited is a non-resident foreign corporation existing under and by virtue of the laws of Hong Kong; that it is the publisher of the ASIAWEEK, an Asian news weekly magazine; that advertisers in the Philippines buy advertising space in Asiaweek through a local company duly designated as Asiaweek's advertising representative, that the advertising materials are sent to Asiaweek in Hong Kong through the local representative for editing, programming, printing and publication in the magazine; that Asiaweek in Hong Kong may or may not accept any advertising sent through the local representative if in its opinion the content of such advertising is contrary to the policy of Asiaweek; that the local representative is not authorized to make any contract for Asiaweek or to assume or create any obligation on behalf of Asiaweek since it is the intent of the appointment of the local advertising representative that contracts shall be accepted and made only by Asiaweek; that after publication of the advertisement, Asiaweek sends an invoice to its local representative for presentation to and collection of payment from the Philippine advertisers; and that payment collected by the local representative from the Philippine advertisers are remitted to Asiaweek in Hong Kong net of its commission. In reply, please be informed that considering that the editing, programming, printing and publication of the advertisements in the ASIAWEEK magazine are performed in Hong Kong, the situs of the income earned by the publisher of said magazine for said services, representing the fees paid for the advertisements in Hong Kong. Such being the case, said fees are considered income from sources without the Philippines, since the same constitute compensation for labor or personal services performed without the Philippines. [Sec. 37(c)(3), Tax Code] And since the publisher is a non-resident foreign corporation subject to income tax only on income from sources within the Philippines [Sec. 24(b)(1), Tax Code], said fees earned by said publisher for services rendered in Hong Kong are not subject to income tax and consequently, not also subject to the 35% withholding tax prescribed in Section 53(e)(2) of the Tax Code, as amended. This ruling is being issued on the basis of the foregoing facts as presented. However, if upon investigation it will be disclosed that the facts are different, then this ruling shall be considered as null and void. cdtech Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner