Regulations for Percentage Tax Purposes on International Air Transport Services

December 1, 1966 REVENUE REGULATIONS NO. 06-66 SUBJECT : Regulations for Percentage Tax Purposes on International Air Transport Services TO : All Internal Revenue Officers and Others Concerned Pursuant to the provisions of Section 338 of Commonwealth Act No. 466, otherwise known as the National Internal Revenue Code, as amended, the following regulations relative to the enforcement of the provisions of Title V, Chapter I of the same Code, especially relating to international air transportation service are hereby promulgated and shall be known as Revenue Regulations No. 6-66. SECTION 1. Definitions : When used in these regulations . (a) The term "international airline" applies to a foreign or domestic airline carrying on international air transportation activities; aisadc (b) The term "off-line airline" means an airline having no flight operations to and from the Philippines; (c) The term "on-line airline" means an international airline having or maintaining flight operations to and from the Philippines; (d) The term "off-line flights" are flight operations carried out or maintained by an airline between ports or points outside the territorial jurisdiction of the Philippines, without touching a port or point situated in the Philippines, except in distress or force majeure; (e) The term "on-line flights" are flight operations carried out or maintained by an airline between ports or points in the territorial jurisdiction of the Philippines and any port or point outside the Philippines; (f) The term "originating from the Philippines" shall include the following: (1) Where a passenger, his excess baggage and/or freight originally commences his (its) flight from any Philippine port to any other port or point outside the Philippines; (2) Where a passenger, his excess baggage and/or freight originally commencing his (its) flight from a foreign port alights or is discharged in any Philippine port for reasons other than in distress or force majeure and thereafter boards or is loaded on another plane, whether or not owned by the same airline company; the flight from the Philippines to any foreign port, shall be considered originating from the Philippines, provided that in case of passenger and his excess baggage the time intervening between arrival and departure actually exceed forty-eight (48) hours. (g) The term "continuous and uninterrupted flight" means a flight in the same plane from the moment a passenger or cargo is lifted from the Philippines to the point of destination of said passenger or cargo. Provided, however, that when a flight is interrupted by force majeure, the transfer to another plane whether or not owned by the same airline company shall be considered as part of the continuous and uninterrupted flight. SECTION 2. International airline companies without flights starting from or passing through any point in the Philippines . (a) An off-line international airline having a branch office or a sales agent in the Philippines which sells ticket for compensation or commission to cover off-line flights of its principal foreign airline or for other airlines, is not considered engaged in business as a common carrier in the Philippines, and, therefore, not subject to common carriers fixed and percentage taxes provided for in Section 182 and 192 of the Tax Code. However, the branch offices or sales agents are subject to the fixed and percentage taxes as commercial broker in accordance with Sec. 182(s) and 195 of the Tax Code, respectively, for the commission received by them. (b) An off-line international airline company maintaining an office or place of business in the Philippines were tickets are sold for other airline companies covering flights, whether originating from Philippine ports or off-line flights, is subject to the fixed and percentage taxes as a commercial broker. SECTION 3. International airline with flights starting from Philippine ports . An international airline having flights originating from any port or point in the Philippines, irrespective of the place where the ticket is sold or issued, within or without the Philippines, is subject to the fixed and percentage tax as common carrier. If the tickets are issued through a sales agent in Philippines, the selling agent is subject to the fixed and percentage taxes as commercial broker. SECTION 4. International airline companies with flights here and selling tickets for other airlines . An international airline company having flights originating from any port or point in the Philippines which also engages itself in the sale of tickets for other airlines is subject to the fixed and percentage taxes as commercial broker. SECTION 5. Gross receipts, how determined . The total amount of gross receipts derived from passage of persons, excess baggage, freight or cargo, including mail cargo, originating from the Philippines in a continuous and uninterrupted flight, irrespective of the place of sale or issue and the place of payment of the ticket, shall be subject to the common carrier's percentage tax (Sec. 192, Tax Code). The gross receipts shall be computed on the cost of the single one way fare as approved by the Civil Aeronautics Board on the continuous and uninterrupted flight of passengers, excess baggage, freight or cargo, including mail, as reflected on the plane manifest of the carrier. Tickets revalidated, exchanged and/or indorsed to another international airline are subject to percentage tax if lifted from a passenger boarding a plane in a port or point in the Philippines. In case of a flight that originates from the Philippines but transshipment of passenger takes place elsewhere on another airline, the gross receipts reportable for Philippine tax purposes shall be the portion of the cost of ticket corresponding to the leg of the flight from port of origin to the point of transshipment. In the case of passengers, the taxable base shall be gross receipts less 25% thereof. SECTION 6. Books and records, keeping of . For purposes of this 2% common carrier's percentage tax, separate books of accounts and records shall be kept subject to inspection of internal revenue officers. Among others, the following records shall be maintained at all times: A. On-line airline companies 1. A complete file of manifests in chronological order, copies of which shall be furnished the Business Tax Division of this Bureau on or before the 20th day of the succeeding month. 2. Columnar books summarizing the manifested outgoing passengers and cargo and containing the following information: (a) Flight Number (b) Date and Time of Departure (c) Name of Passengers or Shippers of Cargo (d) Description of Cargo (e) Destination (f) Class of Passage (First, Economy, etc.) (g) Amount of Regular Fare or Freight or Cargo Charges (h) Transient Passengers This column should be filled up only for passengers stopping in the Philippines for a period of less than forty-eight (48) hours, or if more than 48 hours, the delay was due to force majeure. (See Annexes "A" and "B" for sample forms) 3. Individual Cards A separate card shall be maintained for each transient passenger listed in No. 2 (h) indicating the name of the passenger, his port of origin, date and time of arrival, date and time of his departure. This card must be countersigned by the Immigration Officer on duty at the port of debarkation and embarkation in the Philippines and kept on file by the airline company. 4. A record book containing the names of travel agents selling the airline's tickets, the sales made by each agent, and the respective commissions paid to each of them. B. Off-line airline companies 1. A record book showing the ticket sales indicating the name of passenger, destination, class of passage and money value of fare paid or charged. 2. A record book recording the names of travel agents selling tickets and commissions earned per ticket. SECTION 7. Refund or credit of tax paid . Commission on sales of tickets for other airline companies by an international airline company with flights in the Philippines are subject to the commercial broker's percentage tax. However, refund or credit of commercial broker's percentage tax shall be allowed upon proof that said tickets were actually used in its own flights and the cost thereof have been declared as part of the taxable gross receipts of the company. Claim for refund hereon is subject to the provisions of Section 309 of the Tax Code. SECTION 8. Date of Effectivity . These regulations shall take effect upon publication in the Official Gazette. (SGD.) EDUARDO Z. ROMUALDEZ Secretary of Finance Approval Recommended: (SGD.) MISAEL P. VERA Commissioner of Internal Revenue