Domestic Corporation Recruiting Seamen for Foreign Principals is Subject to Value-added Tax
BIR Ruling No. 392-87 • Bureau of Internal Revenue (BIR) Issuances • Rulings (Numbered) • Dec 9, 1987
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December 9, 1987 BIR RULING NO. 392-87 102 (a) (2) 355-87 392-87 Gentlemen : This refers to your letter dated October 19, 1987 stating that you are a domestic corporation registered with the Securities and Exchange Commission (SEC) and engaged, among others, in recruiting seamen for foreign shipping companies; that as per agreement with foreign shipping agencies, you screen and interview all seamen applicants, arrange for their medical examinations, assist successful seamen applicants until they board their ships either here or abroad and pay to their families the corresponding allotments as required by the Philippine Overseas Employment Administration (POEA). Based on the foregoing, you now request information as to whether you are subject to the Value-Added Tax (VAT) on your services as such. 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%. Accordingly, if you have been paying the 4% contractor's tax and 7% commercial broker's tax imposed by Sections 170 and 174 of the Tax Code, you will no longer pay the same starting January 1, 1988. However, you will continue to pay for the account of your foreign principals the 3% common carrier's tax. adc 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 agreements effectively subject the supply of such services to zero rate. Your foreign shipping principals do not fall within this category. Very truly yours, (SGD.) EUFRACIO D. SANTOS Officer-in-Charge
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