ITAD BIR Ruling No. 304-14

October 15, 2014 ITAD BIR RULING NO. 304-14 Section 118 of the NIRC, as amended by Republic Act No. 10378 and as implemented by RR 15-2013 Air Busan Room No. S-213-01 International Departure Level Mactan-Cebu International Airport Lapu-Lapu City, 6015 Attention: Young Jo Hoang General Manager Gentlemen : This refers to your letter dated October 4, 2013 requesting confirmation of Air Busan's exemption from Common Carrier's Tax under Republic Act (RA) No. 10378 entitled "An Act Recognizing the Principle of Reciprocity as Basis for the Grant of Income Tax Exemptions to International Carriers and Rationalizing other Taxes Imposed thereon by Amending Sections 28 (A) (3) (a), 109, 118 and 236 of the National Internal Revenue Code (NIRC), as amended, and for other Purposes". It is represented that Air Busan is a foreign air carrier organized and existing under the laws of the Republic of Korea with business address at 6th Floor #853-1 Beomcheon-dong, Busanjin-gu, Busan, Korea; that on November 30, 2010 it was issued a license to establish its branch office (Air Busan-Manila) in the Philippines to engage in the business of undertaking international scheduled journeys for the transportation and carriage by air of passenger, freight, and mail to and from the Philippines under company registration number FS201018670; and that Air Busan-Manila is situated at Room S213-01, International Departure Level, Mactan Cebu International Airport, Lapu-Lapu City, Philippines. Based on the above representation, you now seek to confirm Air Busan's exemption from common carrier's tax with respect to its gross receipts on the transport of passengers from the Philippines to another country. In reply, please be informed that prior to the amendment of the Sec. 118 1 of the NIRC of 1997, common carrier's tax was imposed on the quarterly gross receipts of both transport of cargo and transport of passengers of international carriers as there was no distinction given under this section. However, with the enactment of RA 10378, common carrier's tax of 3% is now exclusively imposed on the quarterly gross receipts of international carriers doing business in the Philippines derived from their transport of cargo, to wit: "SEC. 118. Percentage Tax on International Carriers. (A) International air carriers doing business in the Philippines on their gross receipts derived from transport of cargo from the Philippines to another country shall pay a tax of three percent (3%) of their quarterly gross receipts. CIETDc (B) International shipping carriers doing business in the Philippines shall pay a tax equivalent to three percent (3%) of their quarterly gross receipts derived from transport of cargo. (Emphasis supplied)" Therefore, applying the maxim "expressio unius est exclusio alterius" which means the mention of one thing implies the exclusion of another, it can be said that the gross receipts derived from the transport of passengers by the international carriers are already excluded from the imposition of the 3% common carrier's tax. Accordingly, the quarterly gross receipts from the transport of cargo of Air Busan, being an international carrier doing business in the Philippines, shall be subject to the common carrier's tax of 3% while its quarterly gross receipts derived from the transport of passengers are exempted from such tax as provided under Section 118 (A) of the NIRC, as amended by RA 10378 and as implemented by Section 5 of Revenue Regulations (RR) No. 15-2013. Furthermore, as regards the imposition of 12% VAT, please be informed that Section 109 (1) (E) and (S) of the NIRC, as amended by RA 10378 provide: "SEC. 109. Exempt Transactions. The following shall be exempt from the value-added tax: (A) . . . (E) Services subject to percentage tax under Title V; xxx xxx xxx (S) Transport of passengers by international carriers; (T) Sale, importation or lease of passenger or cargo vessels and aircraft, including engine, equipment and spare parts thereof for domestic or international transport operations; CAIaHS xxx xxx xxx" Therefore, the transport of passengers of Air Busan is exempted from the imposition of 12% VAT as expressly provided by the foregoing provision of the NIRC, as amended by RA 10378. As regards its transport of cargo, it is also exempted from 12% VAT as the same is subject to common carrier's tax under Section 118 (A) of the NIRC, as amended by RA 10378 and as implemented by Section 6 of RR 15-2013. This ruling is issued on the basis of the facts as represented. However, if upon investigation, it shall be disclosed that the actual facts are different, then this ruling shall be without force and effect insofar as the herein parties are concerned. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner Bureau of Internal Revenue Footnotes 1. "SEC. 118. Percentage Tax on International Carriers. (A) International air carriers doing business in the Philippines shall pay a tax of three percent (3%) of their quarterly gross receipts. (B) International shipping carriers doing business in the Philippines shall pay a tax equivalent to three percent (3%) of their quarterly gross receipts."