BIR Ruling [UN-040-94]

February 8, 1994 BIR RULING [UN-040-94] Alcorn (Production) Philippines, Inc. 19th Floor, Pacific Star Bldg., Corner Gil Puyat Ave. & Makati Ave. Makati, Metro Manila Attention: Mr . Jimmy N . Manrique VP-Finance & Comptroller Gentlemen : This refers to your letter dated January 17, 1994 requesting for confirmation of your opinion that payments to be made to Smit International, Singapore, Pte. Ltd. (Smit International) under a Charter Party is exempt from Philippine income/withholding tax pursuant to Articles 5 & 7 of the RP-Singapore Tax Treaty and consequently, from the 35% withholding tax provided for in Section 50 (a) in relation to Section 25(b)(1) of the Tax Code., as amended. It is represented that Alcorn (Production) Phils.,Inc. (ALCORN) is a domestic corporation engaged in petroleum operation; that on December 17, 1993, ALCORN entered into a Charter Party with Smit International, a non-resident foreign corporation based in Singapore, under which the latter will provide a vessel capable of performing the oilfield support services for ALCORN drilling operations; that Smit International does not have a permanent establishment here in the Philippines, and is expected to render the said contracted services for a period of approximately 120 days. In reply, please be informed that pursuant to Article 7 (Business Profits) in relation to Article 5 (Permanent Establishment) of the RP-Singapore Tax Treaty, the payments to be made to Smit International by ALCORN in connection with their Charter Party executed on December 17, 1993 are not subject to Philippine income tax and consequently, to the 35% withholding tax, there being no permanent establishment where profits could be attributed in the Philippines (BIR Ruling No. 125-91 dated June 26, 1991). This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, JAIME M. MAZA Assistant Commissioner (Legal Service)