RR No. 15-2013: Implements 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”

Summary

RR No. 15-2013 implements RA No. 10378, which recognizes reciprocity as basis for income tax exemptions of international carriers and amends Sections 28(A)(3)(A), 109, 118 and 236 of the NIRC.

Key points

1. Gross Philippine Billings tax. An international carrier with flights or voyages originating from the Philippines pays the 2 1/2% GPB tax under Section 28(A)(3)(a) and (b) of the NIRC. The exception is a preferential rate or exemption under a tax treaty, international agreement or reciprocity.
2. Computing GPB. GPB includes gross revenue from passage, excess baggage, cargo and mail originating from the Philippines in a continuous and uninterrupted flight, wherever sold or paid. Return trip revenue is excluded. Non-revenue passengers and refunded tickets are not counted. Tickets sold in the Philippines use average net fares from tax coupons, and tickets sold abroad use locally available net fares.
3. Preferential rates and exemption. Carriers may claim treaty rates by filing a Tax Treaty Relief Application with the International Tax Affairs Division under RMO No. 072-10. A TTRA filed or granted before the effective date stays valid. Under reciprocity, the Home Country’s law must exempt Philippine carriers from income tax, and Philippine carriers must actually enjoy it. A business tax exemption alone is not enough.
4. Off-line carriers. An off-line international carrier with a branch, office or sales agent in the Philippines selling passage documents for compensation or commission is not subject to GPB tax. It pays the regular income tax under Section 28(A)(1) on Philippine-source taxable income.
5. Other taxes. Carriers pay a 3% Common Carrier’s Tax on quarterly gross receipts from cargo transport under Section 118. Passenger transport and cargo transport are VAT exempt under Sections 109(1)(S) and 109(1)(E), and these carriers may not register for VAT. Demurrage, detention fees and other charges of sea carriers are Philippine-source income taxed at the regular rate.
6. Reports and certification. A CPA-certified Statement of GPB is attached to quarterly and annual GPB returns, and audited financial statements go with annual returns. A carrier ruled exempt on reciprocity files a sworn certification of no change in Home Country law with the International Tax Affairs Division. Failure to file is a ground to revoke the ruling.

Who is affected

• International air carriers
• International sea carriers
• Domestic shipping agents of foreign shipping lines
• Off-line international carriers

Deadlines and effectivity

• Sworn certification due on or before January 31 of each year
• TTRAs filed or granted before the effective date remain valid

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