BIR Ruling No. 340-2021

REPUBLIC OF THE PHILIPPINES

DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE

Quezon City

Secs.23 (F),42(A)(3),(C)(3) BIR Ruling No. 068-2013 and 108 (A), all of the Code of 1997, as amended cr-340-2021 SEP 2 8"2021 Tax

BDB LAW DU-BALADAD AND ASSOCIATES

Salcedo Village, 1227 Makati City 20th Floor. Chatham House, Rufino Cor. Valero Sts.

Attention: ATTY. BENEDICTA DU-BALADAD Managing Partner

Gentlemen:

services are not to be rendered in the Philippines. ("BPI" for brevity), for confirmation of your opinion that payments made to Surecomp International Ltd ("SIL" for brevity) by BPI are'not subject to Philippine income tax as the This refers to your request on behalf of your client, Bank of the Philippine Islands

Background:

BPI is a corporation organized and existing under the laws of the Republic of the

Avenue corner Paseo de'Roxas, Makati City, Philippines 1550. Philippines, with principal place of business located at BPI Head Office Building. Ayala

28, 2013 issued by the Securities and Exchange Commission (SEC). Worthing Corporate Centre, Worthing, Main Road. Christ Church BB15008: Barbados, West Indies. It is not registered either as a corporation or partnership and has not been licensed to do business in the Philippines. as confirmed by the Certification of Non-Registration dated May On the other hand, SIL is a company registered in Barbados with office located at

in Barbados using internet-based Remote Computer Repair technology. No part of the services under the Agreement will be performed in the Philippines, and no personnel'of SIL will be sent the computer software programs known as the IMEX V6.3.1. While the computer system is Iocated in Manila, the maintenance and repair of any system maifunction are to be performed SIL entered into a Maintenance Agreement with BPI, under which SIL will maintain

to the Philippines.

Consumer Price Index. 124.656. subject to adjustment every year based on the percentage increase. if any. in the US In consideration thereof, BPI shall pay SIL annual maintenance fee amounting to US$

to the other of its desire not to renew the Agreement. The minimum term of the Agreement is Three (3) years. renewable on the same terms for another twelve (12) months for each renewal, which must be made at least ninety (90) days before the anniversary thereof, unless either party gives notice The term of the current Agreement is twelve (12) months beginning August 9. 2012.

Code (Tax Code) of 1997. as amended. a foreign corporation. like SIL. whether or not engaged in trade or business in the Philippines. is subiect to income tax only with respect to income derived from sources in the Philippines. to wit: In reply, please be informed that under Section 23 (F) of the National Internal Revenue

313-22

SURECOMP INTERNATIONAL LTD fy 2: *2021

when otherwise provided in this Code: "SEC. 23. General Principles of Income Taxation in the Philippines. - Except

XXX XXX XXX (F) A foreign corporation, whether engaged or not in trade or business in the Philippines. "(Emphasis and underscoring supplied) Philippines, is taxable only on income derived from sources within the

(3) of the Tax Code of 1997. as amended. income is considered derived in the Philippines only if the services are actually performed in the Philippines, to wit: Concerning income from the provision of services. under Sections 42 (A) (3) and (C)

"SEC. 42. Income from Sources Within the Philippines. (A) Gross Income from Sources Within the Philippines. - The following items of gross income shall be treated as gross income from sources within the Philippines:

XXX xXX xXX (3) Services. - Compensation for labor or personal services performed in the Philippines;

XXX XXX XXX (C) Gross Income from Sources Without the Philippines. - The following items of gross income shall be treated as income from sources without the Philippines:

XXX xXX XXX (3) Compensation for labor or personal services performed without the Philippines; " (Emphasis and underscoring supplied)

held that onIv services rendered in the Philippines under a single contract are subiect to the Supreme Court ruled in this wise: taxing iurisdiction of the Philippines and consequently subject to Philippine income tax. The In Commissioner of Internal Revenue v. Marubeni Corporation'. the Supreme Court

were likewise fabricated and manufactured by the sub-contractors in Japan. All materials and eguipment under Japanese Yen Portion I were made and services for the design. fabrication. engineering and manufacture of the supplies were completelv designed and engineered in Japan. The two sets of ship unloader and loader. the boats and mobile eauipment of the NDC proiect and ammonia storage tanks and refrigeration units were made and completed in Japan. They were alreadv finished products when shipped to the Philippines. steel sheets. pipes and structures. electrical and instrumental apparatus, these were not finished products when shipped to the Philippines. Thev. however. taxing iurisdictions. These acts occurred in two countries Philippines. While the construction and installation work were completed within the Philippines, the evidence is clear that some pieces of eauipment and The other construction supplies listed under the offshore portion such as the "Clearly. the service of design and engineering. supply and deliverv construction. erection and installation. supervision. direction and control of testing and commissioning. coordination. " of two proiects involved two - Japan and the

t G.R. No. 1-37377, 18 December 2001.

C

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O j-2o2 SURECOMP INTERNATIONAL LTD SEP 2 8 2021

completed in Japan. These services were rendered outside the taxing jurisdiction of the Philippines and are therefore not subject to contractor's tax. " (Emphasis and underscoring supplied)

Philippines. the service fees to be paid therefor by BPI to SIL are exempt from income tax and consequently from withholding tax.2 Such being the case and since the subiect services are rendered by SIL outside the

including the use or lease of properties are subject to VAT only if the services are performed in the Philippines. Section 108 (A) of the Tax Code of 1997. as amended, provides that: With respect to value-added tax (VAT), payments for the sale or exchange of services.

Properties. "SEC. 108. Value-added Tax on Sale of Services and Use or Lease of

(A) Rate and Base of Tax. - There shall he levied, assessed and collected, a properties. value-added tax equivalent to twelve percent (12%) of gross receipts derived from the sale or exchange of services, including the fise or lease of

consideration. . . "(Emphasis and underscoring supplied) kinds of services in the Philippines for others for a fee, remuneration or The phrase 'sale or exchange of services' means the performance of all

Service fees to be paid therefor by BPI are likewise exempt from VAT.3 Accordingly, since the services are performed by SIL outside the Philippines, the

considered null and void. if upon investigation, it will be disclosed that the facts are different. then this ruling shali be This ruling is being issued on the basis of the foregoing facts as represented. However.

Very truly yours,

10say

K-1-LMAT Commissioner of Internal Revenue CAESAR R. DULAY 045791

A

2 BIR Ruling 068-2013 dated February 18, 2013. 3 Ibid.

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