Publishing the Answers to the Questions Regarding the Interpretation of Section 260-A of Presidential Decree No. 1959, as Implemented by Revenue Regulations No. 16-84

October 19, 1984 REVENUE MEMORANDUM CIRCULAR NO. 30-84 SUBJECT : Publishing the Answers to the Questions Regarding the Interpretation of Section 260-A of Presidential Decree No. 1959, as Implemented by Revenue Regulations No. 16-84 TO : All Internal Revenue Officers and Others Concerned For the information and guidance of all concerned, quoted hereunder are the answers to the questions clarifying the provision of Section 260-A of Presidential Decree No. 1959 as implemented by Revenue Regulations No. 16-84. 1. Question : What are the foreign exchange transactions covered by the one per cent (1%) transaction tax? acd Answer: The additional one per cent (1) gross receipts tax shall be imposed on all transactions involving buying and selling of foreign exchange for peso by banks, non-bank financial intermediaries and other authorized foreign exchange dealers or agents. "Foreign exchange sale" is a transaction whereby the bank, non-bank financial intermediary or authorized foreign exchange dealer or agent delivers pesos and receives foreign exchange in return. "Foreign exchange purchase" is a transaction whereby the bank, non-bank financial intermediary or authorized foreign exchange dealer or agent delivers pesos and receives foreign exchange in return. Enumerated hereunder are the foreign exchange transactions subject to tax under this law. (a) Transactions of banks 1. Buying transactions . all purchases of foreign exchange earnings of residents arising from trade transactions, e.g., export sales and all types of non-trade inward remittances converted into peso as enumerated hereunder are considered as foreign exchange bought by banks. a. Foreign Exchange Earnings of Philippine Service Exporters. b. Foreign Exchange Earnings of Recruitment, Placement, Manning and Crewing Agencies; c. Foreign Exchange Earnings of Philippine Contractors; d. Foreign Exchange Receipts of Philippine Carriers: Local Agent of Foreign Carriers; e. Foreign Exchange Receipts of Insurance Companies; f. Foreign Exchange Receipts of Telecommunication Companies; g. Foreign Exchange Receipts of Tourist-Oriented Establishments; h. Foreign Exchange Receipts of Tour Operators and Travel Agents; acd i. Foreign Exchange Receipts of Foreign Firms; j. Operating Funds of Multinational Area Headquarters; k. Foreign Exchange Brought in by Transients; l. School Expenses of Foreign Students; m. Overseas Filipino Earners; n. Foreign Investments; and o. Foreign Deposit withdrawals. 2. Selling Transactions . All sales of foreign exchange to cover trade transactions, e.g., imports, etc. and all non-trade outward remittances of foreign exchange paid for in pesos as enumerated hereunder are considered as foreign remittances by banks. a. Remittance of invisibles; b. Sale of travel funds; c. Remittance of funds to cover education, medical, support, gifts, and donation; d. Remittance of emigrant's assets; e. Remittance by temporary residents, tourists and transients; f. Remittance of profits, dividends and earnings; g. Remittance of royalties, fees or rentals; h. Remittance of management fees; i. Remittance of premium by insurance companies; and j. Remittance by international carriers. (b) Transactions of authorized foreign exchange dealers or agents The following transactions paid for in foreign exchange shall be considered as foreign exchange purchases of authorized foreign exchange dealers: casia a. Sales of goods; b. Sales of services; c. Sales of facilities; and d. Outright purchase of foreign currency. (c) Transactions of non-bank financial intermediaries In the case of non-bank financial intermediaries, presently, they are not authorized to engage in the buying and selling of foreign exchange. However, should they be authorized to engage in the buying and selling of foreign exchange, their transactions shall be limited to those transactions embodied in their certificate of authority. 2. Questions : Are there any foreign exchange transaction exempt from the 1% gross receipts tax? Answer : The following transactions are exempted from the imposition of the one per cent (1%) gross receipts tax. 1. Foreign exchange transactions entered into by the Central Bank of the Philippines with local commercial banks and foreign banks; and 2. Foreign exchange transaction entered into by and among local banks (interbank transactions). 3. Questions : When are the foreign exchange transactions taxed ? Answer : The tax of one per cent (1%) on foreign exchange transactions shall accrue once foreign exchange transactions of banks, non-banks financial intermediaries and other authorized, foreign exchange dealers or agents as enumerated in (1) above are actually converted into peso, the dates on which actual conversion into peso takes place as follows: Purchase of foreign exchange a. For spot transactions - upon payment of pesos and delivery of foreign exchange. b. For collections of export bills, checks and drafts - upon purchase. c. For forward transactions - upon delivery of foreign exchange. Sales of foreign exchange a. For spot transactions upon issuance of manager's check, demand draft or telegraphic transfer and mail transfer. b. For letter of credit opened for importation upon negotiation c. For forward contract transactions upon delivery of foreign exchange. 4. Question : Who are liable to the payment of the tax ? Answer : The following are subject to tax on these foreign exchange transactions: 1. Banks; 2. Non-bank financial intermediaries; and 3. Other authorized foreign exchange dealers or agents. 5. Question : What is the tax based upon which the tax is imposed? Answer : For purposes of Revenue Regulations No. 16-84 and for purposes of preparing B.I.R. Form No. 33-02, as revised, the tax base shall be the Gross Peso Value. 6. Question : How do you compute the gross peso value? Answer : For gross peso value is arrived at by multiplying the foreign exchange sold or purchase at the prevailing interbank guiding rate for the day of the transaction. For purposes of the foreign exchange transaction tax return, the average buying or selling rate as the case may be, shall be the interbank guiding rate for the day. All internal revenue officers and others concerned are hereby enjoined to give this Revenue Memorandum Circular as wide publicity as possible. RUBEN B. ANCHETA Acting Commissioner