Taxability of a Person Engaged in the Shipping Agency Business

June 6, 1988 BIR RULING NO. 246-88 102 (a) (2) 107, 115 355-87 246-88 Gentlemen : This refers to your letter dated February 24, 1988 stating that you are engaged in the shipping agency business and as such act as agent of foreign shipping lines calling Philippine ports; that your services embrace such acts like notifying port authorities and arranging quarantine, customs, other port authorities boarding schedule, setting-up schedule for loading and/or discharging stevedores, and securing the required departure clearance upon completion of the ship's loading and/or discharging operations; that you also act as disbursing agent of foreign shipping lines by paying on behalf of the foreign shipping line, bills, port charges and taxes incident to the vessel's call at the Philippine ports; and that for the services rendered, you are paid a fixed agency fee in dollars, remitted inwardly together with the reimbursement of port expenses and/or charges, which dollar remittances are accounted for in accordance with the rules and regulations of the Central Bank of the Philippines. Based on the foregoing facts, you request a ruling as to whether you are required to register under VAT; the implications of Section 102(2) and 103(j) of the Tax Code as amended by EO No. 273 insofar as your business is concerned; and the amount of tax you should pay every quarter. In reply, please be informed that on the basis of your representation, your services which are paid for in dollars inwardly remitted to the Philippines and accounted for in accordance with the rules and regulations of the Central Bank of the Philippines shall be subject to the value-added tax at 0% pursuant to Section 102(a)(2) of the Tax Code as amended by EO No. 273. However, you are still required to register as a VAT-person pursuant to Section 107(a) of the same Code. Moreover, you will continue to pay for the account of your foreign shipping principals the 3% common carrier's tax imposed by Section 115 of the Tax Code. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner