RMC No. 40-2013: Circularizes the full text of RA No. 10378 entitled “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”

Key points

1. Income tax on international carriers. A resident international carrier pays 2 1/2% on its Gross Philippine Billings, defined separately for air carriers and shipping. A carrier may get a preferential rate or exemption on its carriage of persons and excess baggage under a tax treaty, an international agreement, or reciprocity if its home country exempts Philippine carriers.
2. VAT exempt transactions. Section 109 exempts transport of passengers by international carriers and the sale, importation or lease of passenger or cargo vessels and aircraft with their engines, equipment and spare parts. It also exempts importation of fuel, goods and supplies by persons in international shipping or air transport. The listed items also cover bank and non-bank financial intermediary services, and other sales or services where gross annual sales or receipts do not exceed P1,500,000.
3. Percentage tax. International air carriers and international shipping carriers pay 3% of quarterly gross receipts from transport of cargo from the Philippines to another country.
4. VAT registration. Under Section 236(G), a person must register for VAT if gross sales or receipts for the past twelve (12) months exceeded P1,500,000, or if there are reasonable grounds to believe the next twelve (12) months will exceed P1,500,000. Sales exempt under Section 109(A) to (V) are not counted.

Who is affected

• International air carriers and international shipping carriers doing business in the Philippines
• Persons liable to register for VAT

Deadlines and effectivity

• VAT registration test: past 12 months or next 12 months of gross sales or receipts