Tax Liability of Inter-Globe Film Corporation

August 1, 1960 BIR RULING NO. 362-60 1st Indorsement Returned to the Regional Director, Regional District No. 3, Manila, the docket of the Inter-Globe Film Corporation for 1955. cd Opinion of this Office has been requested as to whether or not the Inter-Globe Film Corporation, a non-resident film corporation is allowed to claim deductions in its return for 1955. In this connection, verification should be made whether or not the Inter-Globe Film Corporation is associated or affiliated to the Twentieth Century Fox Phil., Inc. In the affirmative, no further verification of its income tax for 1955 should be made pursuant to the compromise agreement entered into by and between this Office and the Motion Pictures Export Association of America, Inc. and its affiliated and associated companies dated June 10, 1959. If, however, the Inter-Globe Film Corporation is an independent company, the following should be observed in assessing any tax against it. 1. Inter-Globe Film Corporation may exclude from their Philippine gross receipts a proportionate part of the costs of the distribution and exhibition rights, or the cost of production, as the case may be, of the films shown in the Philippines according to the following formulae: Philippine Gross Rentals (a) Cost = Gross rentals in all X Cost of those parts of the entire distribution world for which and exhibition Inter-Globe has acquired rights to the rights, excluding, Inter-Globe Film however, in all cases Corporation. the U.S. and Canada. where Inter-Globe Film Corporation acquired the rights from others; (b) Cost = Philippine Gross Rentals X Production Cost World Gross in cases where Inter-Globe Film Corporation is the producer of the pictures. The Philippine Gross Rentals, the World Gross, cost of distribution and production cost mentioned in the above formulae are understood to refer to the Inter-Globe Film Corporation and only for films shown in the Philippines. (2) Inter-Globe Film Corporation should be allowed to exclude from their Philippine gross receipts (film rentals) the cost of prints exhibited in the Philippines. (3) A ratable portion of the operational expenses (however they are termed in the company's return) should be allowed in 1955 in the following proportion: Philippine Gross Operational = Philippine World Gross___ X expenses Share (4) U. S. Federal income tax on Philippine income shall not be allowed as deduction. However, Philippine taxes paid by or for Inter-Globe Film Corporation are allowed as deductions, except income tax, provided that these deductions are allowed only to the extent that Inter-Globe Film Corporation is obligated or liable to pay such Philippine taxes. (5) All the figures shall be certified by an independent certified public accountant and authenticated by a Philippine consular official. Very truly yours, (SGD.) MELECIO R. DOMINGO Commissioner of Internal Revenue