Taxability of Air Nauru

October 28, 1988 BIR RULING NO. 521-88 24 (a) (2) 000-00 521-88 Gentlemen : This refers to your letter dated August 31, 1988 requesting a ruling on the question of the taxability of Air Nauru. It is represented that you are of the opinion that the tax on International Carriers is a tax on corporations; that Air Nauru is not a corporation and does not fall within the purview of the term corporation as defined in the Tax Code, as amended; that Air Nauru is an integral part of the Department of State of the Republic of Nauru, the Department of Island Development and Industry; that as such, Air Nauru falls under the control of the Minister for Island Development and Industry; that all persons employed in the operations of Air Nauru are public servants and the expenditure of the carrier is controlled by the Parliament of Nauru; that the income of Air Nauru is payable to the Treasury Fund of the Republic; that Air Nauru has no accounts separate from the accounts of the Republic; and that your Government believes that Air Nauru is not taxable as an International Carrier and consequently, Air Nauru and Shipping Agency is not a withholding agent of Air Nauru. In reply, please be informed that under Section 25(a)(2) of the Tax Code, as amended, International Carriers doing business in the Philippines shall pay a tax of two and one-half percent (2 1/2%) on their "Gross Philippine Billings". "Gross Philippine Billings" means gross revenue realized from uplifts of passengers anywhere in the world and excess baggage, cargo and mail originating from the Philippines, covered by passage documents sold in the Philippines, provided, that documents sold outside the Philippines under a "prepaid ticket advice" scheme for passengers originating from the Philippines shall be considered as document sold in the Philippines. Gross revenue from chartered flights originating from the Philippines shall likewise form part of the "Gross Philippine Billings" regardless of the place of sale or payment of the passage documents. For purposes of determining the taxability of revenues from chartered flights, the term "originating from the Philippines" shall include flights of passengers who stay in the Philippines for more than forty-eight (48) hours prior to embarkation. Such being the case, and since Air Nauru, although owned by the government of the Republic of Nauru, is doing business in the Philippines as an international air carrier, it is subject to the 2 1/2% tax on its "Gross Philippine Billings" pursuant to Section 25(a)(2) of the Tax Code, as amended. Moreover, Air Nauru, like any other airline operating in the Philippines, is subject to the 3% common carrier's tax on its gross receipts derived from outgoing freight and passenger services, pursuant to Section 115 of the Tax Code, as amended. cdti Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner