FOREIGN air and ocean carriers serving Philippine ports will soon be able to enjoy tax breaks following the Bureau of Internal Revenue’s issuance of the implementing rules and regulations (IRR) for the recently enacted law liberalizing taxes on foreign carriers.
The fiscal incentives include exemption from the 12% value-added tax (VAT) and the 2.5% gross Philippine billings tax (GPBT), a form of income tax supposedly applied to international airlines or shipping companies.
BIR Revenue Regulation No. 15-2013, signed by Revenue Commissioner Kim Jacinto-Henares, implements Republic Act No. 10378, ” which was signed by President Benigno Aquino on March 7.
The regulation, published on Sept. 24, will take effect on Oct. 9.
RA 10378, “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”, exempts international carriers – both air and shipping – from paying the 3% common carriers tax (CCT) imposed on passenger traffic and value-added tax (VAT) for transporting passengers.
The policy intends to improve “the competitiveness of the Philippine Tourism Industry by encouraging more international carriers to maintain flight and shipping operations in the country and by the eventual reduction of international plane and ship fares,” the BIR’s guidelines stated.
“These are intended to facilitate the movement of goods and services and to attract more foreign tourists and investments,” it added.
To compute the GPBT of international sea carriers, the total amount of gross revenue whether for passenger, cargo, and/or mail originating in the country up to the final destination will be included, regardless of the place of sale, payment of the passage, or freight documents.
The guidelines require a domestic shipping agent to apply for a taxpayer’s identification number (TIN) for each foreign international shipping line it represents and file tax returns.
Each foreign international shipping line is by itself a taxpayer separate and distinct from the agent and the other principals of the same agent.
The shipping agent should not use its own TIN in filing the returns of the principal it represents.
The IRR also grants international carriers – both air and sea –a preferential income tax rate or income tax exemption on their gross revenues derived from the carriage of persons and their excess baggage on the basis of tax treaties to which the Philippines is a signatory.
Reciprocity, however, “may be invoked by an international carrier as basis for Gross Philippine Billings Tax exemption when its Home Country grants income tax exemption to Philippine carriers.”
“Reciprocity requires that Philippine carriers operating in the Home Country of an international carrier are actually enjoying the income tax exemption,” the guidelines stated.
However, demurrage fees, which are in the nature of rent for the use of property of the carrier in the Philippines, is considered income from Philippine source and is subject to income tax under the regular rate as the other types of income of the on-line carrier.”
“Detention fees and other charges relating to outbound cargoes and inbound cargoes are all considered Philippine-sourced income of international sea carriers they being collected for the use of property or rendition of services in the Philippines, and are subject to the Philippine income tax under the regular rate.”
International carriers, as a reportorial requirement, must submit to the Internal Tax Affairs Division a sworn certification stating that there is no change in the domestic laws of its home country granting income tax exemption to Philippine carriers.––Roumina M. Pablo
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