Situs of the Income Derived by the Publisher of Asiaweek Limited

June 28, 1988 BIR RULING NO. 266-88 25 (b) (1) 312-87 266-88 Gentlemen : This refers to your letter dated May 5, 1988 requesting a ruling as to whether or not the income derived by Asiaweek Limited from the sale to the Philippine subscribers of subscription copies of Asiaweek Magazine is subject to withholding tax when the same is remitted by you as its subscription service agent in the Philippines to Asiaweek Limited, HongKong. It is represented that Asiaweek Limited is a corporation duly organized and existing under and by virtue of the laws of HongKong; that it is the publisher of the Asiaweek Magazine; that it prints the magazine in HongKong and disseminates the same throughout Asia, including the Philippines; that Philippine subscriber fills out a subscription order form with complete name and address inserted in Asiaweek Magazine, which is pre-addressed to you, or a subscription may be ordered through community representatives appointed by you; that since you are not authorized to accept or enter into subscription contracts with Philippine subscribers, all subscription orders are forwarded by you to Asiaweek Limited for acceptance or rejection; that if the subscription is accepted, Asiaweek Limited sends the subscription issue to the Manila Post Office pre-addressed to the Philippine subscriber; that the payment for subscription is remitted by you to Asiaweek Limited; and that Asiaweek Limited, pays you for services rendered in connection with the aforesaid sale of its magazine. cdtech In reply thereto, I have the honor to inform you that considering that the printing and publication of the Asiaweek Magazine is done in HongKong, the situs of the income derived by the publisher, Asiaweek Limited from the sale to the Philippine subscribers of subscription copies of the magazine is HongKong. Such being the case, said income is considered income from sources without the Philippines, since the same constitutes compensation for labor or personal services performed without the Philippines [Sec. 36(c)(3), Tax Code, as amended]. 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, as amended], said income earned by said publisher for services rendered in HongKong is not subject to income tax and consequently, not also subject to the 35% withholding tax prescribed in Section 52(e)(2) of the Tax Code, as amended. On the other hand, you should be subject to the corporate income tax of 35% imposed under Section 24(a) of the Tax Code, as amended, on the payment being made by Asiaweek Limited to you for the services you are rendering in connection with the aforesaid sale of its magazine and to the 0% value-added tax (VAT) imposed under Section 102(a)(2) of the Tax Code, as amended by Executive Order No. 273, if you are VAT-registered, said payment to you being paid for in acceptable foreign currency remitted inwardly to the Philippines and accounted for in accordance with the rules and regulations of the Central Bank of the Philippines. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. cdta Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner