RMC No. 122-2021 — Clarifies the tax treatment of integrating the International Passenger Service Charge at the point of sale of airline tickets

BURFAUOF INTERNAL REVENUE M YYT

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BUREAU OF INTERNAL REVENUE REPUELIC OF THE PHILIPPINES DEPARTMENT OF FINANCE Quezon City UKOS MGI.OVISION DEC 1 4 2021 : 301

DEC 1 4 2OZi

revenue memorandum circular no. 122 - 2024

SUBJECT Service Charge at the Point of Sale of Airline Tickets Clarifying the 'Tax Treatment of Integrating the International Passenger

TO All Internal Revenue Officers and Others Concerned

Passenger Service Charge (DPSC) and International Passenger Service Charge (IPSC). commonly referred to as terminal fees, into airline tickets at the point of sale. This Circular is being issued to standardize the tax treatment of integrating the Domestic

following are the rules for IPS:@ collected by Airline Company for Airport Authority: companies and airport authorities. Applying the guidelines laid down in RMC 34-2012, the shall also govern the invcicing and recording of integrated IPsc in the books of airline The provisicns of Feveriue: Memorandum Circular (RMC) No. 34-2012 dated July 13, 2012

a. Collection of IPSC from passengers

the IPSC should be included in the total VAT. the IPsc in the: official receipt to be issued by the Airline Company to the passenger. The VATable and VAT" exempt components of IPsC shall be separately reflected in the official receipt. The share of the Airport Authority in the IPSC should be shown in the Airline and other fees (PD 1957) should be reflected as VAT exempt. Lastly, the VAT component of Company's official receipt as part of receipts subject to VAT while the Aviation Security Fee The Domestic Airline Cornpanies; shall collect the IPsc from passengers and shall include

Fee and other fees (PD 1957) should be reflected as VAT exempt. shall likewise be reflected in its official receipts. The share of the Airport Authority, Aviation However, for International Airlire Companies, the collected IPsc from the passengers

fees under P 1957) may be shown in the financial statements as other income/expense The ac:counts to record the IPsC (Share of Airport Authority, Aviation Security Fee and

down as follows: To illustratex, assume th:art the IP:3C amounts to five hundred fifty pesos (P550.00) broken

Share of Airport Authority PD 1957 (Eureau of Treasury) Aviation Security Fee (EO No. 30 of 1998) P 390.00 100.00 60.00

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of IPSC as fcilows: is a residert foreign corporation and subject to VAT on service fees, shall record the collection A domestic airline company that is subject to VAT, or an international airline company that

Cash IPSC- Due to National Govt. PD 1957 IPS;C- Aviatior Secur ty Fee Ourtput VAT (F'348.21 x 12%) IPS:C-3;hare of Airpor: Authority (P390/1.12) 550.00 348.21 100.00 60.00 41.79

b. Remittance oi IPsC by Airline Company to Airport Authority

full amount of the IPSC (i.e., P550 per passenger). turn, shall issue art official receipt to the Airline Company. The official receipt shall indicate the The IPSC collected by the Airline Company shall be paid to the Airport Authority, which in

is subject to VAT, or an interriational airline company that is subject to VAT on service fees, shall record the remittance of IPsc as follows: Assuming the sarne facts as in the previous illustration, a domestic airline company, which

IPSC-$hare of Airport Authority (P390/1.12) IPSC-- Due to Natioral Govt. PD 1957 IPSC-- Aviatior: Security Fee Input VAT (P348.21 x 12%) Cash 348.21 100.00 41.79 60.00 550.00

VAT on service fees, ias follows: airline company, which is subject to VAT, or an international airline company that is subject to On the other harrd, the Airport Authority shall record the receipt of IPSC from a domestic

Cash IPSC- Due to National Govt. PD 1957 IPS;C- Aviatior Secur ty Fee Output VAT (F348.21 x 12%) IPS;C-S;hare of Airpor: Authority (P390/1.12) 550.00 348.21 100.00 60.00 41.79

c. Payment or Service Fees by Airport Authority to Airline company

the Airport Authority. rules on government money paymer:ts and be subject to Creditable Withholding VAT (CVAT) at the rate of 5% aind Creditable Withholding tax (CWT) of 2% of gross payments. The Airline Company shall is$ue a VAT Official Receipt to acknowledge receipt of the service fees from Payment of service fees by Airport Authority to Airline Company shall be governed by the

shall be treated as: other incorne subject to corporate income tax. However, payment of service fe:es by Airport Authority to international Airline Company

CWT on payment for service fees and issue the corresponding Certificate of Creditable Tax The Airport Authority shall remit: the five percent (5%) CVAT1 and the two percent (2%)

1 Amended by Republic Act No. 10963. Page 2 of 4 BUREAUAT RECORDS MGT.D:VISION NNNY C DEC 14 2021 7:30pm 1:.: C RNAI REVFNUE

international airline company that is a resident foreign corporation, as the income recipient. Withheld at Source (BIR Form 2307) in the name of the domestic airline company or the

subject to VAT, or to an international airline company that is a resident foreign corporation and subject to VAT on service fees, shall record the receipt of service fees as follows: authority to the airline company is 2.95% of the IPsc, a domestic airline company that is In the previous illustration, assuming that the agreed service fees to be paid by the airport

Creditable Withholding Tax- VAT (Service Fees x 5%) Cash Creditable Withholding Tax- Income (Service Fees x 2%) Service Income (550 / 1.12 x 2.95%) Output VAT (Service Fees x 12%) 15.2110 0.7243 0.2897 14.4866 1.7384

This represents the 2% creditable withholding tax on persons residing in the Philippines, pursuant to Section 2.57.2 (N) of Revenue Regulations (RR) No. 2-98, as amended by Section 2.57.2 (J) of RR No. 11-2018, on the income tax on service fees imposed under Section 4.4 of RR No. 15-2013.

foreign corporation and subject to VAT on the service fees, as follows: airline company that is subject to VAT, or an international airline company that is a resident Concurrently, the Airport Authority shall record the payment of service fees to a domestic

Input VAT Service Fees Cash Expanded Withholding Tax- Income Expanded Withholding Tax- VAT 14.4866 1.7384 15.2110 0.7243 0.2897

shall be recorded in its books as follows: resident foreign corporation and subject to VAT on the service fees, the receipt of service fees If, however, the service fees are earned by an international airline company that is a non-

DNISIO 3 r DEC 1A 32 22 A YN Y REVENUE JREAU FJNTERNAL oF Final Withholding Tax- Income (Service Fees x 25%) Creditable Withholding Tax- VAT (Service Fees x 5%) Cash * This is pursuant to Section 114 (C) of the National Internal Revenue Code of 1997, This represents the 25% Final Tax Withheld, pursuant to Section 2.57.1 (I) of RR No 2-98, as amended by Republic Act No. 11534, on the income tax imposed under Section 4.4 of Revenue Regulation No. 15-2013. as amended ("Tax Code"). Service Income (550 / 1.12 * 2.95%) Output VAT Service Fees x 12%) 11.8790 3.6217 0.7243 14.4866 1.7384

fees, as follows: airline company that is a non-resident foreign corporation and subject to VAT on the service While the Airport Authority shall record the payment of service fees to an international

Service Fees 14.4866 Input VAT Cash Final Withholding Tax- Income Expanded Withholding Tax- VAT 1.7384 11.8790 0.7243 3.6217 2

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exempt under Section 109 of the Tax Code shall be allowed to register for VAT purposes in relation to IPsc, being unrelated to the transport of passengers and cargo. Section 6 of RR No. 15-2013 to the contrary notwithstanding, International Carriers

to gross receipts derived from transport of cargo from the Philippines to another. independently from the Gross Philippines Billings (GPB) Tax imposed under Section 28(A)(3) of the Tax Code and the 3% Common Carrier's Tax imposed under Section 118 of the Tax Code, as the GPB refers to the amount of gross revenue derived from carriage of persons. excess baggage, cargo. and mail originating from the Philippines in a continuous and uninterrupted flight, while the percentage tax on International Carriers in Section 118 pertains Moreover, the collection of taxes on IPSC specified under this RMC should be treated

mentioned revenue from carriage of persons, excess baggage, cargo, and mail originating from the Philippines. Philippines, then justifiably, it should be treated independently from the taxes imposed on the Considering that the IPsc is a service charge for services _performed within the

VAT Official Receipt to the airline company for the full amount of IPSC (i.e., P550 per Receipt to the airport authority for the service fees. 'However, to comply with the withholding requirements, the tax to be withheld on the service fees, whether CVAT, CWT, or FWT, shall be paid back to the Airport Authority for remittance to the BIR. Fees it charged, the same rules as above shall apply. The Airport Authority shall still issue a passenger) and at the same time, the airline company shall likewise issue a VAT Official Should the airline company opt to remit the IPSC to the Airport Authority net of the Service

a publicity as possible. All concerned are hereby enjoined to be guided accordingly and give this Circular as wide

This Circular shall take effect immediately.

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K- BUREAU OF INTERNALREVENUE DEC 14 2021 4 :a00m WTYN C Commissioner of Internal Revenue CAESAR R. DULAY 1 04779 4

RECCRU vStSION

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