Income Earned by the Publisher for Services Rendered in HongKong is Not Subject to Income Tax and to the 35% Withholding Tax

October 8, 1987 BIR RULING NO. 312-87 37-c 219-85 312-87 Gentlemen : This refers to your letter dated December 5, 1986 requesting a ruling as to whether or not Dow Jones Publishing Company (Asia) Inc. (Dow Jones Asia) is exempt from income tax on revenues derived from the sale to Philippine subscribers of subscription copies of the Asian Wall Street Journal which Dow Jones Asia publishes. It is represented that Dow Jones Asia is a corporation duly organized and existing under the laws of HongKong, that it is the publisher of the newspaper, The Asian Wall Street Journal, that Dow Jones Asia prints and publishes the newspaper in HongKong and ships copies thereof to Philippine subscribers pursuant to a subscription agreement; that under the subscription arrangement, the Philippine subscriber fills out a subscription form which is essentially a contract between Dow Jones Asia and the Philippine subscriber; that the subscription form is addressed and forwarded to the Asian Wall Street Journal Subscription Department in HongKong which further accepts or rejects the subscription application, that if the subscription application is accepted, the Subscription Department enters the name of the new subscriber in its computer and pre-addresses a subscription copy of the Asian Wall Street Journal, ready for shipment to the Philippine subscriber along with other pre-addressed subscription copies; that the subscription copies are air shipped FOB HongKong; that Asia/Pacific Circulation Exponents, Inc. (Asia/Pacific) is a domestic corporation whose sole function is merely to receive and forward all subscription applications and payments under the subscription contracts to the Asian Wall Street Journal's Subscription Department in HongKong; and that Asia/Pacific does not enter into a subscription contract with the Philippine subscriber for and on behalf of Dow Jones Asia or the Asian Wall Street Journal. In reply thereto, I have the honor to inform you that considering that the printing and publication of the Asian Wall Street Journal is done in HongKong, the situs of the income derived by the publisher, Dow Jones Asia from the sale to Philippine subscribers of subscription copies of the newspaper 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. 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 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 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. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner