Navarro Amper and Co.

December 27, 2021 ITAD BIR RULING NO. 050-21 Articles 5 (Permanent Establishment) and 7 (Business Profits); Philippines-Singapore Tax Treaty Navarro Amper and Co. 19th Floor, Net Lima Plaza 5th Avenue corner 26th Street Bonifacio Global City 1634 Taguig City Attention: Mr. _______________ Manager Tax and Corporate Services Gentlemen : This refers to your tax treaty relief application that was filed on September 15, 2008 requesting confirmation that service fees paid by AFS Philippines, Inc. (AFS) to Amstel Financial Services (S) Pte. Ltd. (Amstel) are exempt from income tax pursuant to the Convention between the Republic of the Philippines and the Republic of Singapore for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (PH-Singapore Tax Treaty). FACTS Amstel is a foreign corporation organized and existing under the laws of Singapore and a resident thereof based on its Certificate of Residence issued by the Inland Revenue Authority of Singapore. It is engaged in providing money and government securities brokering services to commercial banks, investment banks and other liquidity providers in Asia. 1 It is not registered as a corporation or partnership in the Philippines based on the Certification of Non-Registration of Corporation/Partnership issued by the Securities and Exchange Commission. On the other hand, AFS is a domestic corporation engaged in providing money and government securities brokering, and specialized and independent brokering services to commercial banks, investment banks and other liquidity providers that trade in the wholesale financial markets, without acting as a broker for the trading of securities other than government securities, pursuant to the Securities Regulation Code of the Philippines and without taking or receiving investments from the public. AFS is a wholly-owned subsidiary of Amstel. On January 16, 2008, AFS and Amstel entered into an Agreement whereby Amstel agreed to provide extensive management and supervisory services to AFS, particularly: (a) management and supervision of its overall management and operations as and when determined necessary by AFS in consultation with Amstel; (b) management and supervision of its financial matters including its tax compliance and the daily operation of its back office as and when determined necessary by Amstel in its sole discretion; (c) management and supervision of AFS's Information Technology (IT) by the provision, among others, of servers, IT personnel and 'Amstel Trade' maintenance to house the relevant data for AFS; and (d) such other services, which in Amstel's sole opinion, are necessary for its management and operations. The services will be performed and rendered either outside the Philippines or within the Philippines. In consideration, AFS will pay service fees to Amstel at a percentage rate to be agreed upon in writing by the parties. The Agreement took effect on January 1, 2008 and shall, unless otherwise terminated in accordance with the provisions thereof, continue indefinitely. Based on the passports, schedule of dispatches and the Sworn Statements executed by AFS on May 7, 2021 and July 3, 2018, three employees/personnel of Amstel rendered the agreed services in the Philippines on the following dates: Name of Employee Date of Arrival Date of Departure Duration of Stay Total per Year ABC February 25, 2008 March 1, 2008 6 March 10, 2008 March 15, 2008 6 March 24, 2008 March 29, 2008 6 May 5, 2008 May 13, 2008 9 June 9, 2008 June 12, 2008 4 July 27, 2008 August 2, 2008 7 September 16, 2008 September 20, 2008 5 November 9, 2008 November 14, 2008 6 December 14, 2008 December 17, 2008 4 53 January 19, 2009 January 21, 2009 3 March 16, 2009 March 20, 2009 5 April 14, 2009 April 17, 2009 4 September 6, 2009 September 8, 2009 3 September 26, 2009 September 30, 2009 5 November 24, 2009 November 29, 2009 6 26 February 17, 2010 February 20, 2010 4 April 10, 2010 April 16, 2010 7 July 27, 2010 July 30, 2010 4 August 31, 2010 September 4, 2010 5 October 4, 2010 October 11, 2010 8 December 7, 2010 December 11, 2010 5 33 February 22, 2011 February 25, 2011 4 June 6, 2011 June 10, 2011 5 October 18, 2011 October 22, 2011 5 November 28, 2011 November 30, 2011 3 17 January 12, 2012 January 13, 2012 2 February 2, 2012 February 3, 2012 2 February 6, 2012 February 9, 2012 4 November 26, 2012 November 30, 2012 5 13 March 11, 2013 March 15, 2013 5 July 8, 2013 July 12, 2013 5 December 3, 2013 December 6, 2013 4 14 February 24, 2014 February 27, 2014 4 June 30, 2014 July 4, 2014 5 9 March 9, 2015 March 12, 2015 4 4 TOTAL 169 169 DEF February 27, 2008 March 1, 2008 4 March 27, 2008 March 29, 2008 3 May 20, 2008 May 22, 2008 3 August 21, 2008 August 23, 2008 3 October 16, 2008 October 18, 2008 3 16 January 19, 2009 January 21, 2009 3 March 6, 2009 March 8, 2009 3 March 16, 2009 March 17, 2009 2 May 25, 2009 May 27, 2009 3 July 28, 2009 July 30, 2009 3 November 9, 2009 November 12, 2009 4 December 1, 2009 December 3, 2009 3 December 8, 2009 December 10, 2009 3 December 17, 2009 December 19, 2009 3 27 May 18, 2010 May 21, 2010 4 August 23, 2010 August 25, 2010 3 October 21, 2010 October 23, 2010 3 December 16, 2010 December 18, 2010 3 13 June 14, 2011 June 18, 2011 5 July 18, 2011 July 21, 2011 4 September 12, 2011 September 16, 2011 5 October 21, 2011 October 24, 2011 4 December 15, 2011 December 18, 2011 4 22 February 2, 2012 February 3, 2012 2 March 20, 2012 March 23, 2012 4 May 9, 2012 May 11, 2012 3 July 11, 2012 July 13, 2012 3 September 28, 2012 October 1, 2012 4 December 12, 2012 December 14, 2012 3 19 February 26, 2013 March 1, 2013 4 April 3, 2013 April 5, 2013 3 May 24, 2013 May 29, 2013 6 July 28, 2013 August 1, 2013 5 September 12, 2013 September 13, 2013 2 October 4, 2013 October 7, 2013 4 December 18, 2013 December 20, 2013 3 27 February 12, 2014 February 14, 2014 3 April 3, 2014 April 4, 2014 2 April 30, 2014 May 2, 2014 3 May 9, 2014 May 11, 2014 3 September 23, 2014 September 26, 2014 4 December 19, 2014 December 20, 2014 2 17 March 24, 2015 March 27, 2015 4 June 1, 2015 June 2, 2015 2 June 24, 2015 June 27, 2015 4 August 17, 2015 August 20, 2015 4 August 27, 2015 August 28, 2015 2 October 2, 2015 October 5, 2015 4 November 3, 2015 November 6, 2015 4 December 3, 2015 December 4, 2015 2 26 March 30, 2016 April 2, 2016 4 May 2, 2016 May 7, 2016 6 July 19, 2016 July 23, 2016 5 August 7, 2016 August 10, 2016 4 September 6, 2016 September 10, 2016 5 September 14, 2016 September 17, 2016 4 September 26, 2016 September 30, 2016 5 October 27, 2016 October 29, 2016 3 November 9, 2016 November 12, 2016 4 December 2, 2016 December 6, 2016 5 45 January 10, 2017 January 14, 2017 5 January 29, 2017 January 29, 2017 1 February 3, 2017 February 4, 2017 2 February 15, 2017 February 24, 2017 10 April 7, 2017 April 9, 2017 3 May 9, 2017 May 13, 2017 5 June 17, 2017 June 18, 2017 2 June 26, 2017 June 29, 2017 4 July 25, 2017 July 30, 2017 6 September 6, 2017 September 8, 2017 3 October 23, 2017 October 28, 2017 6 November 23, 2017 November 25, 2017 3 December 6, 2017 December 12, 2017 7 December 27, 2017 December 28, 2017 2 59 January 14, 2018 January 14, 2018 1 January 19, 2018 January 21, 2018 3 February 26, 2018 March 2, 2018 5 March 25, 2018 March 27, 2018 3 April 2, 2018 April 2, 2018 1 April 9, 2018 April 10, 2018 2 May 3, 2018 May 4, 2018 2 May 30, 2018 June 2, 2018 4 June 21, 2018 June 23, 2018 3 July 10, 2018 July 15, 2018 6 August 12, 2018 August 13, 2018 2 August 19, 2018 August 20, 2018 2 September 18, 2018 September 20, 2018 3 October 22, 2018 October 25, 2018 4 December 18, 2018 December 22, 2018 5 46 February 1, 2019 February 4, 2019 4 March 18, 2019 March 22, 2019 5 April 9, 2019 April 12, 2019 4 May 11, 2019 May 12, 2019 2 May 19, 2019 May 20, 2019 2 June 4, 2019 June 8, 2019 5 July 15, 2019 July 19, 2019 5 July 29, 2019 August 1, 2019 4 August 19, 2019 August 20, 2019 2 August 23, 2019 August 26, 2019 4 September 17, 2019 September 21, 2019 5 October 28, 2019 October 31, 2019 4 November 25, 2019 November 26, 2019 2 December 1, 2019 December 2, 2019 2 December 5, 2019 December 7, 2019 3 53 January 21, 2020 January 24, 2020 4 4 TOTAL 374 374 GHI July 5, 2019 July 9, 2019 5 July 12, 2019 July 19, 2019 8 July 29, 2019 July 31, 2019 3 August 27, 2019 August 28, 2019 2 September 11, 2019 September 15, 2019 5 October 17, 2019 October 20, 2019 4 October 29, 2019 October 31, 2019 3 November 13, 2019 November 15, 2019 3 November 25, 2019 November 27, 2019 3 December 7, 2019 December 10, 2019 4 December 15, 2019 December 21, 2019 7 47 January 4, 2020 January 7, 2020 4 January 15, 2020 January 15, 2020 1 February 12, 2020 February 16, 2020 5 March 3, 2020 March 8, 2020 6 16 TOTAL 63 63 RULING In reply, please be informed that under Section 28 (B) (1) of the National Internal Revenue Code of 1997 (Tax Code),as amended, any income derived by a nonresident foreign corporation is generally subject to income tax at the rate of 30% based on the gross amount thereof, to wit: " SEC. 28. Rates of Income Tax on Foreign Corporations. xxx xxx xxx (B) Tax on Nonresident Foreign Corporation. (1) In General. Except as otherwise provided in this Code, a foreign corporation not engaged in trade or business in the Philippines shall pay a tax equal to thirty-five percent (35%) of the gross income received during each taxable year from all sources within the Philippines, such as interests, dividends, rents, royalties, salaries, premiums (except reinsurance premiums), annuities, emoluments or other fixed or determinable annual, periodic or casual gains, profits and income, and capital gains, except capital gains subject to tax under subparagraph 5(c) and (d) above: Provided, That effective 1, 2009, the rate of income tax shall be thirty percent (30%)." 2 However, such income is exempt to the extent required by any treaty obligation binding upon the Philippine Government based on Section 32 (B) (5) of the Tax Code: " SEC. 32. Gross Income. xxx xxx xxx (B) Exclusions from Gross Income. The following items shall not be included in gross income and shall be exempt from taxation under this Title: xxx xxx xxx (5) Income Exempt under Treaty. Income of any kind, to the extent required by any treaty obligation binding upon the Government of the Philippines." Pertinent to the case are paragraph 1, Article 7 (Business Profits) and paragraphs 1 and 2, Article 5 (Permanent Establishment) of the PH-Singapore Tax Treaty, which provide as follows: " Article 7 BUSINESS PROFITS 1. The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on or has carried on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to that permanent establishment." " Article 5 PERMANENT ESTABLISHMENT 1. For the purposes of this Convention, the term 'permanent establishment' means a fixed place of business in which the business of the enterprise is wholly or partly carried on. 2. The term 'permanent establishment' includes specially but is not limited to: a) A seat of management; b) A branch; c) An office; d) A store or other sales outlet; e) A factory; f) A workshop; g) A warehouse, in relation to a person providing storage facilities for others; h) A mine, quarry, or other place of extraction of natural resources; i) A building site or construction or assembly project or installation project or supervisory activities in connection therewith, provided such site, project or activity continues for a period more than 183 days; and j) The furnishing of services, including consultancy services, by a resident of one of the Contracting States through employees or other personnel, provided activities of that nature continue (for the same or a connected project) within the other Contracting State for a period or periods aggregating more than 183 days." Based on the foregoing treaty provisions, the profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on or has carried on business as such, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to the permanent establishment. As defined under the treaty, a "permanent establishment" is a fixed place of business in which the business of an enterprise is wholly or partly carried on, and includes especially, a seat of management, a branch, an office, a store or other sales outlet, a factory, and a workshop. The furnishing of services, including consultancy services, by a resident of a Contracting State through employees or other personnel thereof, provided activities of this nature continue (for the same or a connected project) within the other Contracting State for a period or periods aggregating more than 183 days, also constitutes a permanent establishment. In this case, Amstel furnished services in the Philippines through its employees for more than 183 days, as detailed below: Inclusive Dates Duration of Stay Total per Year February 25, 2008 March 1, 2008 6 days March 10, 2008 March 15, 2008 6 March 24, 2008 March 29, 2008 6 May 5, 2008 May 13, 2008 9 May 20, 2008 May 22, 2008 3 June 9, 2008 June 12, 2008 4 July 27, 2008 August 2, 2008 7 August 21, 2008 August 23, 2008 3 September 16, 2008 September 20, 2008 5 October 16, 2008 October 18, 2008 3 November 9, 2008 November 14, 2008 6 December 14, 2008 December 17, 2008 4 62 January 19, 2009 January 21, 2009 3 March 6, 2009 March 8, 2009 3 March 16, 2009 March 20, 2009 5 April 14, 2009 April 17, 2009 4 May 25, 2009 May 27, 2009 3 July 28, 2009 July 30, 2009 3 September 6, 2009 September 8, 2009 3 September 26, 2009 September 30, 2009 5 November 9, 2009 November 12, 2009 4 November 24, 2009 November 29, 2009 6 December 1, 2009 December 3, 2009 3 December 8, 2009 December 10, 2009 3 December 17, 2009 December 19, 2009 3 48 February 17, 2010 February 20, 2010 4 April 10, 2010 April 16, 2010 7 May 18, 2010 May 21, 2010 4 July 27, 2010 July 30, 2010 4 August 23, 2010 August 25, 2010 3 August 31, 2010 September 4, 2010 5 October 4, 2010 October 11, 2010 8 October 21, 2010 October 23, 2010 3 December 7, 2010 December 11, 2010 5 December 16, 2010 December 18, 2010 3 46 February 22, 2011 February 25, 2011 4 June 6, 2011 June 10, 2011 5 June 14, 2011 June 18, 2011 5 July 18, 2011 July 21, 2011 4 September 12, 2011 September 16, 2011 5 October 18, 2011 October 24, 2011 7 November 28, 2011 November 30, 2011 3 December 15, 2011 December 18, 2011 4 37 January 12, 2012 January 13, 2012 2 February 2, 2012 February 3, 2012 2 February 6, 2012 February 9, 2012 4 March 20, 2012 March 23, 2012 4 May 9, 2012 May 11, 2012 3 July 11, 2012 July 13, 2012 3 September 28, 2012 October 1, 2012 4 November 26, 2012 November 30, 2012 5 December 12, 2012 December 14, 2012 3 30 February 26, 2013 March 1, 2013 4 March 11, 2013 March 15, 2013 5 April 3, 2013 April 5, 2013 3 May 24, 2013 May 29, 2013 6 July 8, 2013 July 12, 2013 5 July 28, 2013 August 1, 2013 5 September 12, 2013 September 13, 2013 2 October 4, 2013 October 7, 2013 4 December 3, 2013 December 6, 2013 4 December 18, 2013 December 20, 2013 3 41 February 12, 2014 February 14, 2014 3 February 24, 2014 February 27, 2014 4 April 3, 2014 April 4, 2014 2 April 30, 2014 May 2, 2014 3 May 9, 2014 May 11, 2014 3 June 30, 2014 July 4, 2014 5 September 23, 2014 September 26, 2014 4 December 19, 2014 December 20, 2014 2 26 March 9, 2015 March 12, 2015 4 March 24, 2015 March 27, 2015 4 June 1, 2015 June 2, 2015 2 June 24, 2015 June 27, 2015 4 August 17, 2015 August 20, 2015 4 August 27, 2015 August 28, 2015 2 October 2, 2015 October 5, 2015 4 November 3, 2015 November 6, 2015 4 December 3, 2015 December 4, 2015 2 30 March 30, 2016 April 2, 2016 4 May 2, 2016 May 7, 2016 6 July 19, 2016 July 23, 2016 5 August 7, 2016 August 10, 2016 4 September 6, 2016 September 10, 2016 5 September 14, 2016 September 17, 2016 4 September 26, 2016 September 30, 2016 5 October 27, 2016 October 29, 2016 3 November 9, 2016 November 12, 2016 4 December 2, 2016 December 6, 2016 5 45 January 10, 2017 January 14, 2017 5 January 29, 2017 January 29, 2017 1 February 3, 2017 February 4, 2017 2 February 15, 2017 February 24, 2017 10 April 7, 2017 April 9, 2017 3 May 9, 2017 May 13, 2017 5 June 17, 2017 June 18, 2017 2 June 26, 2017 June 29, 2017 4 July 25, 2017 July 30, 2017 6 September 6, 2017 September 8, 2017 3 October 23, 2017 October 28, 2017 6 November 23, 2017 November 25, 2017 3 December 6, 2017 December 12, 2017 7 December 27, 2017 December 28, 2017 2 59 January 14, 2018 January 14, 2018 1 January 19, 2018 January 21, 2018 3 February 26, 2018 March 2, 2018 5 March 25, 2018 March 27, 2018 3 April 2, 2018 April 2, 2018 1 April 9, 2018 April 10, 2018 2 May 3, 2018 May 4, 2018 2 May 30, 2018 June 2, 2018 4 June 21, 2018 June 23, 2018 3 July 10, 2018 July 15, 2018 6 August 12, 2018 August 13, 2018 2 August 19, 2018 August 20, 2018 2 September 18, 2018 September 20, 2018 3 October 22, 2018 October 25, 2018 4 December 18, 2018 December 22, 2018 5 46 February 1, 2019 February 4, 2019 4 March 18, 2019 March 22, 2019 5 April 9, 2019 April 12, 2019 4 May 11, 2019 May 12, 2019 2 May 19, 2019 May 20, 2019 2 June 4, 2019 June 8, 2019 5 July 5, 2019 July 9, 2019 5 July 12, 2019 July 19, 2019 8 July 29, 2019 August 1, 2019 4 August 19, 2019 August 20, 2019 2 August 23, 2019 August 26, 2019 4 August 27, 2019 August 28, 2019 2 September 11, 2019 September 15, 2019 5 September 17, 2019 September 21, 2019 5 October 17, 2019 October 20, 2019 4 October 28, 2019 October 31, 2019 4 November 13, 2019 November 15, 2019 3 November 25, 2019 November 27, 2019 3 December 1, 2019 December 2, 2019 2 December 5, 2019 December 10, 2019 6 December 15, 2019 December 21, 2019 7 86 January 4, 2020 January 7, 2020 4 January 15, 2020 January 15, 2020 1 January 21, 2020 January 24, 2020 4 February 12, 2020 February 16, 2020 5 March 3, 2020 March 8, 2020 6 20 576 days The 183-day threshold was exceeded when Amstel rendered services on October 22, 2011. Such being the case, Amstel is deemed to have created a permanent establishment in the Philippines. Considering that Amstel carries on business in the Philippines through its duly constituted permanent establishment, the service fees paid by AFS to Amstel are, therefore, subject to income tax in the Philippines at the rate of 30% based on the gross amount thereof. With regard to the remuneration of DEF _____________ and ___ ABC _________, Article 14 of the PH-Singapore Tax Treaty provides as follows: " Article 14 PERSONAL SERVICES 1. Subject to the provisions of Articles 15, 17, 18, and 19, salaries, wages and other similar remuneration or income for personal (including professional) services derived by a resident of a Contracting State, shall be taxable only in that Contracting State, unless the services are performed in the other Contracting State. If the services are so performed, such remuneration or income as is derived therefrom may be taxed in that other Contracting State. 2. Notwithstanding the provisions of paragraph 1, remuneration or income derived by a resident of a Contracting State for personal (including professional) services performed in the other Contracting State shall be taxable only in the first-mentioned Contracting State if a) the recipient is present in the other Contracting State for a period or periods not exceeding in the aggregate 90 days in the case of professional services and 183 days in other cases, in the calendar year concerned; and b) the remuneration or income is paid by, or on behalf of, a person who is a resident of the first-mentioned Contracting State; and c) the remuneration or income is not borne directly by a permanent establishment which that person has in the other Contracting State." xxx xxx xxx Under Article 14, salaries, wages and other similar remuneration or income for personal (including professional) services derived by a resident of a Contracting State shall be taxable only in that State, unless the services are performed in the Philippines. If the services are so performed, such remuneration or income as is derived therefrom may be taxed in the Philippines. However, though performed in the Philippines, the remuneration or income shall only be taxable in Singapore if the following conditions concur: a) the recipient is present in the Philippines for a period or periods not exceeding in the aggregate 90 days in the case of professional services and 183 days in other cases, in the calendar year concerned; b) the remuneration or income is paid by, or on behalf of, a person who is a resident of the Singapore; and c) the remuneration or income is not borne directly by a permanent establishment which that person has in the Philippines. Certainly, DEF _____________ and ___ ABC _________ satisfied the first and second conditions as their respective lengths of stay in the Philippines did not exceed 183 days in any calendar year and their remunerations were paid by Amstel, a resident of Singapore. The third condition was not, however, satisfied because, as established, Amstel is deemed to have a permanent establishment in the Philippines. The proper test here is whether any deduction otherwise available with respect to that remuneration should be taken into account in determining the profits attributable to the permanent establishment. 4 Undoubtedly, the remunerations paid to the subject employees of Amstel, being expenses which are incurred for the purposes of the permanent establishment of Amstel in the Philippines, should be taken into account in determining the profits attributable to such permanent establishment. Therefore, the remunerations received by these individuals are taxable in the Philippines under paragraph 2, Article 14 of the Philippines-Singapore tax treaty, in relation to Section 25 (B) of the Tax Code, which provides: " SEC. 25. Tax on Nonresident Alien Individual. xxx xxx xxx (B) Nonresident Alien Individual Not Engaged in Trade or Business Within the Philippines. There shall be levied, collected and paid for each taxable year upon the entire income received from all sources within the Philippines by every nonresident alien individual not engaged in trade or business within the Philippines as interest, cash and/or property dividends, rents, salaries, wages, premiums, annuities, compensation, remuneration, emoluments, or other fixed or determinable annual or periodic or casual gains, profits, and income, and capital gains, a tax equal to twenty-five percent (25%) of such income. Capital gains realized by a nonresident alien individual not engaged in trade or business in the Philippines from the sale of shares of stock in any domestic corporation and real property shall be subject to the income tax prescribed under Subsections (C) and (D) of Section 24." On the other hand, the remuneration for personal services performed in the Philippines by GHI ________________ a Filipino citizen employed by Amstel, is taxable in the Philippines based on Section 23 (C) of the Tax Code, which provides: " SEC. 23. General Principles of Income Taxation in the Philippines. Except when otherwise provided in this Code: xxx xxx xxx (C) An individual citizen of the Philippines who is working and deriving income from abroad as an overseas contract worker is taxable only on income derived from sources within the Philippines: x x x" Finally, a value-added tax (VAT) at the rate of 12% is imposed on the sale or exchange of services, including the use or lease of properties, in the Philippines, pursuant to Sections 105 and 108 (A) of the Tax Code, to wit: SEC. 105. Persons Liable. Any person who, in the course of trade or business, sells barters, exchanges, leases goods or properties, renders services, and any person who imports goods shall be subject to the value-added tax (VAT) imposed in Sections 106 to 108 of this Code. The value-added tax is an indirect tax and the amount of tax may be shifted or passed on to the buyer, transferee or lessee of the goods, properties or services. This rule shall likewise apply to existing contracts of sale or lease of goods, properties or services at the time of the effectivity of Republic Act No. 7716. The phrase "in the course of trade or business" means the regular conduct or pursuit of a commercial or an economic activity, including transactions incidental thereto, by any person regardless of whether or not the person engaged therein is a non-stock, nonprofit private organization (irrespective of the disposition of its net income and whether or not it sells exclusively to members or their guests), or government entity. The rule of regularity, to the contrary notwithstanding, services as defined in this Code rendered in the Philippines by nonresident foreign persons shall be considered as being rendered in the course of trade or business. " SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties. (A) Rate and Base of Tax. There shall be levied, assessed and collected, a value-added tax equivalent to twelve percent (12%) of gross receipts derived from the sale or exchange of services, including the use or lease of properties." The phrase "sale or exchange of services" means the performance of all kinds of services in the Philippines for others for a fee, remuneration or consideration, x x x" Under Section 105 of the Tax Code, any person who, in the course of trade or business, renders services shall be subject to the 12% VAT imposed under Section 108 (A) thereof. For VAT purposes, non-resident persons who perform services in the Philippines are deemed to be making sales in the course of trade or business, even if the performance of services is not regular. 5 Moreover, the performance of services in the Philippines is an indispensable condition. Applying these provisions in this case, the services rendered by Amstel in the Philippines are subject to 12% VAT, while those rendered in Singapore or outside the Philippines are exempt from VAT. The 12% VAT shall be withheld by AFS before making any payment to Amstel and shall be remitted to the Bureau of Internal Revenue within ten (10) days following the end of the month the withholding was made 6 using BIR Form No. 1600 (Monthly Remittance Return of Value-Added Tax and Other Percentage Taxes Withheld) or BIR Form No. 1600-VT (Monthly Remittance Return of Value-Added Tax Withheld), whichever is applicable. The duly filed form and its accompanying proof of payment shall serve as documentary substantiation for AFS's claim of input VAT on the service fees. For your information and guidance. Very truly yours, (SGD.) CAESAR R. DULAY Commissioner of Internal Revenue Footnotes 1. https://www.timesbusinessdirectory.com/companies/amstel-financial-services-s-pte-ltd. 2. The rate was reduced to 25% beginning January 1, 2021 pursuant to Republic Act No. 11534, otherwise known as the Corporate Recovery and Tax Incentives for Enterprises Act or CREATE. 3. Note from the Publisher: Copied verbatim from the official document. Missing Footnote Reference and Footnote Text. 4. Paragraph 7.1 of the Commentary of the Organisation for Economic Cooperation and Development (OECD) on paragraph 2 of Article 15 of the OECD Model Tax Convention on Income and on Capital (Full Version), November 21, 2017. 5. Sec. 4.105-3, Revenue Regulations (RR) No. 16-2005, otherwise known as Consolidated Value-Added Tax Regulations of 2005. 6. Sec. 4.114-2, RR No. 16-2005.