15% Branch Profit Remittance Tax

December 19, 1988 BIR RULING NO. 583-88 25-a 028-86 583-88 Gentlemen : In connection with BIR Ruling No. 25-a-000-00-302-87 dated September 23, 1987 where this Office ruled that Saudia Arabian Airlines Corporation (Saudia) an on-line airline engaging in business in the Philippines is considered a resident foreign corporation subject to the 2 1/2% tax on its gross Philippine billings pursuant to Section 25(a)(2)(A) of the Tax Code, as amended. Moreover, this Office likewise ruled that although, Saudia is a branch nevertheless, it is not liable to the payment of the 15% branch profit remittance tax. In connection therewith, please be informed that under the aforesaid BIR Ruling No. 302-87, this Office ruled that the 20% (now 15%) branch profit remittance tax is in addition to the regular corporate income tax due from resident foreign corporation; and that this regular corporate income tax which is equivalent to 35% of the taxable income is now prescribed by Section 25(a)(l) of the Tax Code, as amended by Executive Order No. 37. However, after a restudy, this Office is of the opinion as it hereby holds that Saudia is liable to the payment of the 20% (now 15%) branch profit remittance tax under Section 25(a)(3) of the Tax Code, as amended. Section 25(a)(3) of the Tax Code, as amended provides that any profit remitted by a branch to its head office shall be subject to a tax of 15% except those registered with the Export Processing Zone Authority. Accordingly, only those registered with the Export Processing Zone Authority are exempt from the 15% branch profit remittance tax. cdtech Moreover, Section 2 of Revenue Regulations No. 8-75 dated October 29, 1975 amending Section 15 of Revenue Regulations No. 2, provides in part as follows: "SEC. 2. Section 15 of Revenue Regulations No. 2 is hereby amended to read as follows: xxx xxx xxx "(b) Tax on resident foreign corporations . "(1) . . . "(2) Profit remitted abroad by a branch office to its mother company shall be subject to 20% tax, except those registered with the Export Processing Zone Authority. The herein tax is in addition to the regular tax imposed under subsection (a) of this section . . ." the 15% branch profit remittance tax is in addition to the regular tax imposed under subsection (a) of Section 25 of the Tax Code, as amended which necessarily includes international carriers since it is taxed under Section 25(a)(2) of the Tax Code, as amended by Executive Order No. 273. It is a cardinal rule in taxation that exemptions should be construed strictissimi juris because it is highly disfavored in law; and he who claims an exemption must be able to justify his claim by the clearest grant of organic or statute law. An exemption from the common burden cannot be permitted to exist upon vague implications (Asiatic Petroleum Co., vs. Llanes, 49 Phil. 466). This revokes BIR Ruling No. 25-a-000-00-302-87 dated September 23, 1987. cdti Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner