BIR Ruling [UN-356-95]

October 2, 1995 BIR RULING [UN-356-95] Alcorn (Production) Philippines, Inc. 19th Floor, Pacific Star Bldg. corner Gil Puyat Avenue & Makati Avenue Makati City Attention: Mr . Jimmy M . Manrique VP-Finance & Comptroller Gentlemen : This refers to your letter dated June 13, 1995 requesting for a confirmation of your opinion that payments to be made to Semco Salvage & Marine (Pte) Ltd. (Semco) under a charter party contract whose guaranteed commencement date is June 2, 1995, are exempt from Philippine income/withholding tax pursuant to Article 5 (2) (1) 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) Philippines, Inc., (ALCORN) is a domestic corporation engaged in petroleum operations; that it entered into a charter party contract with Semco, a non-resident foreign corporation based in Singapore, under which the latter will provide a vessel capable of performing the oilfield support services of the oil wells drilling operations in offshore Palawan starting June 2, 1995 which you estimate to be not more than seventy (70) days; and that the primary term of the contract which, is the time required to re-enter, sidetrack and complete well, is not more than fifteen (15) days; that Semco does not have a fixed place of business in the Philippines and will render service for an actual period of less than 183 days. In reply, please be informed that pursuant to the Article 8 (Business Profits) in relation to Article 5 of the RP-Singapore Tax Treaty, payment to be made to Semco by Alcorn in connection with their charter party contract are not subject to Philippine income tax and consequently to the 35% withholding tax because there is no permanent establishment where their profit 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. cdlex Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service) By: ALICIA P. CLEMENO Head Rev. Executive Assistant (Legal Service)