BIR Ruling [UN-029-95]

January 16, 1995 BIR RULING [UN-029-95] Pelaez Gregorio Sipin Bala & Robles Padilla Bldg., Emerald Avenue Ortigas Center, 1600 Pasig Metro Manila Attention: Atty . Vicente G . Gregorio Gentlemen : This refers to your letter dated December 5, 1994 stating that a Hongkong Corporation will purchase bananas from a Philippine supplier; that this Hongkong Corporation will charter ships from a party which is also a foreign corporation to transport the bananas; that both corporations, the purchaser and the owner of the chartered ships are non-resident foreign corporations and the charter agreement is entered outside the Philippines; and that the chartered ships shall be under the control of the Hongkong Corporation-purchaser which shall be treated also as the carrier and shall carry the cargo or bananas solely for its own account and shall not carry for any third party. In connection therewith, you are requesting opinion as to whether the non-resident foreign corporation-owner of the chartered vessel is subject to the 2 tax on "Gross Philippines Billings" and the common carriers tax. In reply thereto, please be informed that since the non-resident foreign corporation-owner of the chartered vessel is not doing business in the Philippines, it is not subject to the 2% tax on "Gross Philippine Billings" and to the 3% common carriers tax under Secs. 25(a)(2)(B) and 115 both of the Tax Code, as amended. Moreover, the Hongkong Corporation which chartered the vessel to be used to transport bananas which it purchased from the Philippines solely for its own account and shall not carry cargo for any third party is not also subject to the 2% tax on "Gross Philippine Billings" and to the 3% common carriers tax considering that it cannot derive income in carrying its own cargo nor can it be a carrier for its own cargo. (BIR Ruling No. 401-87 dated December 15, 1987) cdi Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)