Application of the Provisions of Sec. 54 (Tax Code)

August 1, 1958 BIR RULING NO. 412-58 The Assistant Regional Director Regional District No. 4 Quezon City S i r : Reference is made to your letter dated May 27, 1958, requesting comment on the recommendation contained in the Memorandum dated May 26, 1958 of the Chief, Legal Branch, that Office, enclosed therewith. cdll In answer thereto, you are informed that, based on the facts appearing in the aforesaid memorandum, this Office fully subscribes to the opinion stated in that memorandum which we quote for ready reference: "It is clear from the foregoing facts that the recipient of the royalties in question is Franklin Baker Company of the Philippines and, as heretofore stated, it reported the royalties it received from the Bireley's California Orange International, S.A. as part of its taxable income for which it paid income taxes at the rate of 28%. It appears further that the royalty was not remitted abroad but paid to a local corporation which is a subsidiary of the foreign corporation. Obviously, therefore, the provisions of Section 54 of the Tax Code do not apply to this case as that section is applicable only in those cases where the recipient of the income is a foreign corporation not engaged in trade or business within the Philippines and not having any Office or place of business therein. Moreover, even granting that said Section 34 applies, the fact that the recipient of the income has declared the same for income tax purposes, the same should not be re-collected from the withholding agent pursuant to Section 53(e) of the Tax Code. Be guided accordingly. llcd Very truly yours, (SGD.) MELECIO R. DOMINGO Acting Commissioner of Internal Revenue