Shipping Agent and Manning Agent of Foreign Principals Whose Commissions are Directly Remitted to the Philippines in US foreign currency is Subject to VAT

November 9, 1987 BIR RULING NO. 355-87 102 (a) (2) 000-00 355-87 Gentlemen : This refers to your letter dated October 6, 1987 requesting clarification as to whether that company, as shipping agent and manning agent of various foreign principals whose commissions together with ship disbursements, allotments and other expenses are directly remitted to the Philippines in US foreign currency, is subject to the Value-Added Tax law. In reply, please be informed in the affirmative. Pursuant to Section 102 (a)(2) of the Tax Code as amended by Executive Order No. 273, services other than processing, manufacturing or repacking goods, the consideration for which is paid for in acceptable foreign currency which is remitted inwardly 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%. This means that starting January 1, 1988, you are no longer subject to the 7% commercial broker's tax on your commission income and to the 4% contractor's tax on manning income imposed by Sections 174 and 170 of the Tax Code, as amended. However, you will continue to pay for the account of your foreign principal the 3% common carrier's tax. Subsection 3 of Section 102 of Executive Order No. 273 applies only to services performed by VAT-registered persons for persons or entities whose exemption under special laws or international arrangements effectively subject the supply of such services to zero rate. Your foreign shipping principals do not fall within this category. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner