Exemption of Takaoka Engineering and Construction Co., Ltd. of Japan from Corporate Income Tax

July 20, 1988 BIR RULING NO. 341-88 25 251-88 341-88 Gentlemen : This refers to your letter dated July 4, 1988 requesting confirmation of your opinion to the effect that your client, Takaoka Engineering and Construction Co., Ltd. of Japan, its Japanese subcontractors, suppliers or personnel are not liable to income tax and the value-added tax imposed under the National Internal Revenue Code in connection with Contract No. 870818/PH-P67-A dated August 18, 1987. cdt It is represented that your client is the main contractor for the Contract for the Rehabilitation of the Electric Power Supply Component for the Bataan Export Processing Plant Project (Contract No. 870818/PH-P67-A dated 18 August 1987) entered into between your client and the Government of the Republic of the Philippines represented by the Implementing Officer, Philippine-Japan Project Loan Assistance Program; and that said project is funded by the Overseas Economic Cooperation Fund of Japan (OECF) pursuant to the Exchange of Notes between the Philippine Government and the Japanese Government. In reply thereto, I have the honor to inform you that pursuant to the Exchange of Notes dated April 28, 1984 between the Philippine Government and the Japanese Government pertinent portion of which is quoted hereunder as follows: "The Government of the Republic of the Philippines will, by itself or through its executing agencies or instrumentalities assume all fiscal levies or taxes imposed in the Republic of the Philippines on Japanese firms and nationals operating as suppliers, contractors or consultants on and/or in connection with any income that may accrue from the supply of products and/or services to be provided under the loan." Japanese contractors and their foreign personnel as well as their suppliers are not liable to Philippine taxes. Such being the case Takaoka Engineering and Construction Co., Ltd. of Japan which is undertaking OECF assisted projects in the Philippines is not liable to the corporate income tax imposed under Section 25(a)(1) of the Tax Code, as amended, on resident foreign corporations engaged in trade or business within the Philippines; to the 10% value-added tax on its imported equipment as well as for its sale of services relative to the aforementioned project pursuant to Sections 101 and 102 of the Tax Code, as amended. Moreover, its foreign personnel is not also liable to the individual income tax prescribed under Section 22 of the same Code, as amended. Finally, Takaoka Engineering and Construction Co. Ltd. of Japan is not required to file quarterly income tax returns and final or adjustment returns on income derived from the aforesaid project. Likewise, its foreign personnel are not also required to file individual income tax returns on income also derived from the said project. cdta Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner