Clarification as to Proper Tax Base in the Computation of the 15% Branch Profit Remittance Tax

March 17, 1982 REVENUE MEMORANDUM CIRCULAR NO. 08-82 SUBJECT : Clarification as to Proper Tax Base in the Computation of the 15% Branch Profit Remittance Tax TO : All Internal Revenue Officers and Others Concerned In BIR Ruling No. 016-79 dated April 18, 1979 anent the 15% branch profit remittance tax as an income tax imposed under Section 24(b) (2), National Internal Revenue Code of 1977, as amended, this Office ruled that ". . . . the 15% branch profit remittance tax should be based on the amount of P1,504,330.43 representing profit derived from the disposition of the shares, 15% of which is P225,649.57." It will be noted that the basis of computation in accordance with the ruling is profit without deduction for the 15% tax . cd On January 21, 1980, this Office, in another ruling issued in answer to a query as to the tax base upon which the 15% branch profit remittance tax should be imposed held that "the 15% branch profit remittance tax shall be imposed on the profit actually remitted abroad and not on the total branch profit out of which the remittance is to be made." As the latter ruling seems to have given rise to some misconception that it modified BIR Ruling No. 016-79 with respect to the manner of computation of the 15% branch profit remittance tax, this Office issued a clarificatory ruling on Oct. 23, 1981 explaining "The above ruling (of January 21, 1980) merely emphasized the distinction between the total branch profit which is remittable and that portion of the branch profit actually remitted without deduction on account of the tax to be paid. casia "The phrase 'any profit remitted abroad' should be construed to mean the profit to be remitted. Hence, there must be an actual remittance, as distinguished from profit which is remittable. "To give an example: If the total branch profit is P115,000.00 but the amount to be remitted is only P100,000.00, then the tax base should be P100,000.00. "Moreover, the 15% profit remittance tax imposed by Section 24 (b) (2) of the Tax Code is an income tax, it is therefore clear that the same is non-deductible from the gross (profit) income. Inasmuch as the tax is an exaction on profit realized for remittance abroad, the deduction thereof as an expense is not sustained by law since nowhere in Section 30 of the Tax Code is it provided that the same is deductible. Besides deductions from gross income are matters of legislative grace, what is not expressly granted by law is deemed withheld." acd Considering that the 15% branch profit remittance tax is imposed and collected at source, necessarily the tax base should be the amount actually applied for by the branch with the Central Bank of the Philippines as profit to be remitted abroad. It is desired that this Circular be given as wide a publicity as possible. (SGD.) RUBEN B. ANCHETA Acting Commissioner