4/7/2021
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FIRST DIVISION
[ G.R. No. 222239, January 15, 2020 ]
ASSOCIATION OF INTERNATIONAL SHIPPING LINES, INC., APL CO.
PTE LTD., AND MAERSK-FILIPINAS, INC., PETITIONERS, VS.
SECRETARY OF FINANCE AND COMMISSIONER OF INTERNAL
REVENUE, RESPONDENTS.
DECISION
LAZARO-JAVIER, J.:
Antecedents
On July 1, 2005, Republic Act No. 9337[1] (RA 9337) was enacted, amending select
provisions of the 1997 National Internal Revenue Code (NIRC), namely, Sections 27,
28, 34, 106, 107, 108, 109, 110, 111, 112, 113, 114, 116, 117, 119, 121, 148, 151,
236, 237 and 288.
In relation to these amendments, then Commissioner of Internal Revenue (CIR) Lilian
Hefti issued Revenue Memorandum Circular No. 31-2008[2] (RMC 31-2008) dated
January 30, 2008. It sought to "clarify certain provisions of the National Internal
Revenue Code of 1997, as amended (Code), as it applies to shipping companies and
their agents as well as their suppliers to ensure that the law is properly implemented
and taxes are properly collected, in a manner that aligns with acceptable business
practices." Its relevant portions read:
Q-3: Are on-line international sea carriers subject to VAT?
A-3: No. On-line international sea carriers are not subject to VAT they being
subject to percentage tax under Title V of the Tax Code. They are liable to
the three percent (3%) percentage tax imposed on their gross receipts from
outbound fares and freight, pursuant to Section 118 of the Code.
However, if these on-line international sea carriers engage in other
transactions not exempt under Section 119 of the Code, they shall be liable
to the twelve percent (12%) VAT on these transactions.
Q-4: Are demurrage fees collected by on-line international sea carriers due
to delay by the shipper in unloading their inbound cargoes subject to tax?
A-4: Yes, Demurrage fees, which are in the nature of rent for the use of
property of the carrier in the Philippines is considered income from Philippine
source and is subject to income tax under the regular rate as the other
types of income of the on-line carrier. Said other line of business may
likewise be subject to VAT or percentage tax applying the rule on threshold
discussed in the succeeding paragraph.
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