ITAD BIR Ruling No. 305-14

October 15, 2014 ITAD BIR RULING NO. 305-14 Republic Act 10378 & Revenue Regulations No. 15-2013 Delta Airlines, Inc. 10th Floor, Philamlife Tower Paseo de Roxas Makati City Attention: Cristopher Walker Regional Director-Government Affairs Gentlemen : This refers to your letter dated June 5, 2013 requesting confirmation that Delta Airlines, Inc. ("Delta") is exempt from tax on its Gross Philippine Billings on the basis of reciprocity under Republic Act (RA) No. 10378. It is represented that Delta is an international air carrier organized and existing under the laws of the Delaware, USA with business address at 1030 Delta Boulevard ATG/981, Atlanta, GA 30354, USA; that it was issued a license to establish its branch office in the Philippines to engage in international air transportation services per certificate of license issued by the Securities and Exchange Commission on 29 December 2009; and that according to a consularized copy of Section 883 of the Internal Revenue Code of 1986 of America on the exclusions from gross income, gross income derived by a corporation organized in a foreign country from the international operation of aircraft and ships shall not be included in their gross income and shall be exempt from taxation if such foreign country grants an equivalent exemption to corporations organized in the United States. Based on the above representation, you now seek to confirm the exemption provided under the Section 28 (A) (3) (a) of Republic Act (RA) No. 8424, otherwise known as the National Internal Revenue Code of 1997, as amended by RA No. 10378 otherwise known as "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" , as implemented by Revenue Regulations (RR) No. 15-2013. In reply, please be informed that as a general rule an international carrier doing business in the Philippines shall pay a tax of two and one-half percent (2 1/2%) on its 'Gross Philippine Billings' as provided under Section 28 A (3) of the NIRC of 1997, as amended. However, with the enactment of RA 10378, an international carrier doing business in the Philippines may now avail of exemption on the tax imposed on its gross revenue derived from the carriage of persons and their excess baggage if its home country also grants income tax exemption to Philippine Carriers, to wit: aSCHcA "Section 1. Section 28(A)(3)(a) of Republic Act No. 8424, otherwise known as the National Internal Revenue Code of 1997, as amended, is hereby further amended to read as follows: SEC. 28. Rates of Income Tax on Foreign Corporations. (A) Tax on Resident Foreign Corporations. (1) . . . (2) . . . (3) International Carrier. An international carrier doing business in the Philippines shall pay a tax of two and one-half percent (2 1/2%) on its 'Gross Philippine Billings' as defined hereunder: (a) International Air Carrier xxx xxx xxx Provided, That international carriers doing business in the Philippines may avail of a preferential rate or exemption from the tax herein imposed on their gross revenue derived from the carriage of persons and their excess baggage on the basis of an applicable tax treaty or international agreement to which the Philippines is a signatory or on the basis of reciprocity such that an international carrier, whose home country grants income tax exemption to Philippine carriers, shall likewise be exempt from the tax imposed under this provision. xxx xxx xxx" (Emphasis Provided) Based on the foregoing and considering that the government of the United States of America grants reciprocal tax exemption to Philippine Air Carriers based on Section 883 of the Internal Revenue Code of 1986 of America, this Office is of the opinion and so holds that Delta is exempted from income tax on its Gross Philippine Billings on the carriage of persons and their excess baggage pursuant to RA No. 10378. EACIaT In relation thereto, under Section 7 of Revenue Regulations (RR) No. 15-2013, Delta, through its authorized representative or personnel, is obliged to submit to the International Tax Affairs Division (ITAD) a sworn certification stating that there is no change in the domestic laws of its Home Country granting income tax exemption to Philippine carriers before January 31 of each year from the time Delta was issued a ruling by the BIR confirming its Gross Philippines Billings Tax exemption on the basis of reciprocity. Failure to submit the sworn certification shall be a ground for the revocation of such ruling. 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