RR No. 15-2002: Governs the imposition of Income Tax on the Gross Philippine Billings, other income of International Air Carriers and Common Carrier’s Tax, as well as the manner of claiming deductions on travel expenses and freight charges incurred

Summary

RR No. 15-2002, issued October 7, 2002, prescribes the rules on Income Tax on Gross Philippine Billings (GPB) and other income of international air carriers. It also covers common carrier’s tax and the manner of claiming deductions on travel expenses and freight charges.

Key points

1. Off-line airlines. An off-line airline with a branch office or sales agent in the Philippines that sells passage documents for off-line flights of its principal or head office, or for other airlines on flights originating from Philippine ports or off-line flights, is not engaged in business as an international air carrier in the Philippines. It is not subject to GPB Tax or the 3% common carrier’s tax.
2. GPB rate and base. An international air carrier with flights originating from any Philippine port or point is subject to GPB Tax of 21/2%, unless a different tax treaty rate applies. The base includes gross revenue from passage of persons, excess baggage, cargo and/or mail originating from the Philippines in a continuous and uninterrupted flight.
3. Passenger revenue. For tickets sold in the Philippines, revenue is the actual amount for transportation services shown on the tax coupon. For tickets sold outside, it is determined from locally available net fares, taking into account seasonal fare rate, class of passage, passenger classification, date of embarkation and final destination. GPB is the monthly average net fare per final destination, class and passenger classification, multiplied by passengers flown per the flight manifest.
4. Baggage, cargo and mail. Excess baggage revenue is the actual revenue on the official receipt or similar document. Freight or cargo revenue is the airway bill amount after discounts, and mail is the amount in the cargo manifest.
5. Exclusions and conversion. The return trip to the Philippines is not part of GPB. Non-revenue passengers are given no value, and refunded tickets are excluded. For transshipment on another airline, GPB is the revenue for the leg flown from the Philippines to the transshipment point. The foreign exchange rate is the average monthly airline rate or the Bankers Association of the Philippines rate, whichever is higher.
6. Deductions and common carrier’s tax. Claims for travel expenses and freight charges rest on the actual cost of buying the plane ticket or airway bill, not the passenger coupon. For tickets bought from travel agents, the travel agent’s sales invoice or official receipt validates the claim. Gross receipts for the common carrier’s tax equal the GPB tax base.

Who is affected

• International air carriers
• Off-line airlines with a branch office or sales agent in the Philippines

Summary by Tax Resources PH. It is not a substitute for the full text of the issuance or professional advice.