3% Franchise Tax

November 28, 1990 BIR RULING NO. 222-90 117 000-00 222-90 Gentlemen : This refers to your letters dated September 14, and November 2, 1990 stating that you are a corporation organized under the laws of the Philippines and duly registered with the Securities and Exchange Commission; that under R.A. No. 3006 dated June 19, 1960 subject to the provisions of the Constitution and the provisions of Act Numbered Three Thousand eight hundred and forty six, entitled "An Act providing for the regulation of radio stations and radio communications in the Philippine Islands and for other purposes", Commonwealth Act Numbered One hundred forty-six, known as the Public Service Act and their amendments and other applicable laws, you were granted a franchise to establish, maintain and operate in the Philippines, at such places as the said grantee may select, circuits and/or stations for international and domestic communications with the authority to receive and transmit messages, impressions, pictures, music, entertainment, advertising and signals throughout the Philippines and between the Philippines and foreign countries, including ships at sea, airplanes and other conveniences, by means of electricity, electromagnetic waves or any other kind of energy, force, variations or impulses whether conveyed by wires, radiated through space or transmitted through any other medium, to supply facilities for such purposes and to charge and receive compensation thereof by tolls and charges; that you now operate the radio paging systems of Pocketbell Philippines, under the said franchise and by virtue of the National Telecommunications Commission's approval of the transfer to you of Pocketbell's Certificate of Public Convenience and Necessity for its paging operations, its assets and liabilities as well as the tradename, Pocketbell Philippines; that the heart and soul of your Pocketbell Manila's paging operations is the operator-assisted computer controlled message center; that in order to reach a Pocketbell subscriber, a call must be placed with the operators who are trained to handle computers and encoders which take care of routing the messages to the appropriate transmitters; that Cebu and Davao's operations however, are handled yet on a manual basis due to the small volume of messages being processed; that in all cases, your Pocketbell operates its own simulcast system of radios used to broadcast the messages; that the systems of transmitters and receivers set up in all the cities adequately cover the Metro Manila Area; and that the broadcasts are made in the UHF and VHF frequency bands. aisadc In connection therewith, you now request confirmation of your opinion to the effect that you are subject to the 3% franchise tax pursuant to Section 117 of the Tax Code, as amended. In reply thereto, please be informed that your opinion is hereby confirmed. Section 117 (b) of the Tax Code, as amended, provides, viz: "Sec. 117. Tax on Franchises . Any provision of general or special law to the contrary notwithstanding, there shall be levied, assessed and collected in respect to all franchise, upon the gross receipts from the business covered by the law granting the franchise, a tax in accordance with the schedule prescribed hereunder: "(a) On electric utilities, city gas and water supplies Two (2%) per cent "(b) On telephone and/or telegraph systems, and radio/or broadcasting stations Three (3%) per cent "(c) On other franchise Five (5%) per cent "The grantee shall file the return with, and pay the tax due thereon to, the Commissioner of Internal Revenue or his duly authorized representative in accordance with the provisions of Section 125 of this Code, and the return shall be subject to audit by the Bureau of Internal Revenue, any provision of any existing law to the contrary notwithstanding. (As existing law to the contrary notwithstanding. (As amended by Executive Order No. 72, Nov. 25, 1986)." Such being the case, and since you were granted a franchise to establish, maintain and operate in the Philippines, at such places as you may select, circuits and/or stations for international and domestic communications with the authority to receive and transmit messages, impressions, pictures, music, entertainment, advertising and signals throughout the Philippines and between the Philippines and foreign countries, your operation of the radio paging systems of Pocketbell Philippines under said franchise and by virtue of the National Telecommunications Commissions approval of the transfer to you of Pocketbell's Certificate of Public Convenience and Necessity for its paging operations, is subject to the three (3%) per cent franchise tax under Section 117 (b) of the Tax Code, as amended. cd Very truly yours, (SGD.) VICTOR A. DEOFERIO, JR. Deputy Commissioner