BIR Ruling [UN-096-94]

March 22, 1994 BIR RULING [UN-096-94] Alcorn (Production) Philippines, Inc. 19th Floor, Pacific Star Bldg., Corner Gil Puyat Ave. & Makati Ave. Makati, Metro Manila Attention: Mr . Mario M . Uson VP-Admin & legal Gentlemen : This refers to your letter dated February 16, 1994 requesting for confirmation of your opinion that income derived by Reading & Bates Drilling Co. from its Drilling Contract with your company is exempt from income tax and consequently from the 8% final withholding tax imposed tax and consequently from the 8% final withholding tax imposed under Presidential Decree No. 1354. It is represented that Alcorn (Production) Phils., Inc. (ALCORN) is a domestic corporation engaged in oil exploration; that on July 24, 1990, ALCORN entered into a Drilling Contract with Reading & Bates Drilling Co., a corporation organized under the laws of the State of Oklahoma, U.S.A. for the use of its rig, "Jim Cunningham,", to drill Alcorn's exploration well, West Linapacan-1, in offshore Northwest of Palawan; that Reading & Bates mobilized its rig, Jim Cunningham, to the Philippines arriving on site offshore Palawan on October 24, 1990 and Commenced drilling operations on October 26, 1990 completing the same on December 29, 1990 or sixty (60) days from spud date and departed from the Philippines thereafter; and that Reading & Bates Philippine Branch or a Representative Office. In reply, please be informed that pursuant to Article 8 (Business Profits) in relation to Article 5 (Permanent establishment) of the RP-US Tax Treaty, the income derived by Reading & Bates Drilling Co., in connection with its Drilling Contract with Alcorn July 24, 1990 for a duration of sixty (60) days is not subject to Philippine income tax and consequently, to the 8% final withholding tax under P.D. 1354, there being no permanent establishment where profits could be attributed in the Philippines (BIR Ruling No. 151-89 dated July 19, 1989). 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. cdtech Very truly yours, ALICIA P. CLEMENO Officer-in-Charge (Legal Service)