CORPORATION - International Carriers

Summary

This video delves into the taxation of international carriers under Philippine tax law, specifically focusing on the income tax for foreign and resident foreign corporations. It explains the tax rates applicable to international carriers, such as airlines and shipping companies, operating in the Philippines. Key concepts include the 2.5% tax on gross Philippine billings, exemptions through international agreements, and the role of reciprocity in tax treatment. The discussion highlights how various types of income, including passenger fares and cargo, are taxed, as well as the impact of treaties and domestic laws on taxation.

Takeaways

• 😀 International carriers, including foreign airlines and shipping companies, are subject to Philippine income tax based on their gross Philippine billings.
• 😀 A foreign corporation is classified as a resident foreign corporation (RFC) if it is not a special corporation, such as multinational companies with regional operating headquarters (ROH).
• 😀 From 2022, regional operating headquarters are now subject to regular corporate income tax in the Philippines.
• 😀 Special corporations in the Philippines include educational institutions, hospitals, and international air and shipping carriers.
• 😀 International carriers are foreign entities granted landing rights in the Philippines for international transportation services.
• 😀 The income tax rate for international carriers' gross Philippine billings is generally 2.5%, unless a preferential rate is specified by an international agreement or treaty.
• 😀 An international agreement or reciprocity may lower the tax rate or exempt certain international carriers from Philippine income tax.
• 😀 Reciprocity applies when a foreign country's tax laws grant similar exemptions or preferential rates to Philippine carriers operating abroad.
• 😀 The tax on international carriers includes gross revenue from passengers, cargo, and mail transported in continuous flights or voyages originating from the Philippines.
• 😀 Examples of international carriers include foreign airlines like Emirates, which are subject to the 2.5% tax on their Philippine operations, while Philippine Airlines is taxed similarly based on its international operations.

Q & A

What is the classification of international carriers under the corporate tax system discussed in the transcript?

International carriers are classified as 'resident foreign corporations' under the tax system. This classification applies to foreign corporations doing business in the Philippines, specifically those granted landing rights in Philippine ports for international flights or shipping operations.

What is the tax rate applied to international carriers in the Philippines based on their gross Philippine billings?

The tax rate on international carriers in the Philippines is 2.5% of their gross Philippine billings, which refers to the revenue generated from passengers, cargo, and related services originating from the Philippines.

Are international carriers subject to the same tax rate regardless of their home country?

No, international carriers may be subject to a lower tax rate or exempt from taxes if an international agreement or treaty exists between the Philippines and their home country, based on reciprocity principles.

What is meant by 'reciprocity' in the context of international carriers' tax exemptions?

Reciprocity refers to an arrangement where an international carrier from a country that exempts Philippine carriers from income tax would also be exempt from Philippine taxes, provided their home country offers the same exemption to Philippine carriers.

How does the tax exemption for international carriers work under bilateral treaties or international agreements?

If an international agreement or treaty between the Philippines and another country grants tax exemptions to Philippine carriers, international carriers from that country can claim similar exemptions on their gross Philippine billings, based on the terms of the treaty.

What does 'gross Philippine billings' include for international carriers?

Gross Philippine billings include the total revenue derived from passengers, cargo, excess baggage, mail, and other related services originating from the Philippines, regardless of where the passage documents are issued or the place of payment.

What types of international carriers are affected by the gross Philippine billings tax?

The gross Philippine billings tax applies to both international air carriers (such as airlines) and international shipping carriers, provided they operate flights or voyages originating from the Philippines.

What is the significance of the 2.5% tax rate for international carriers?

The 2.5% tax rate on gross Philippine billings is a flat rate designed to tax the revenue of international carriers that operate in or out of the Philippines. This rate is generally applied unless a preferential rate or exemption is granted through an international agreement or treaty.

Can international carriers reduce their tax obligations in the Philippines based on specific conditions?

Yes, international carriers can reduce their tax obligations by invoking international treaties or agreements that offer reduced tax rates or exemptions, such as when the carrier's home country offers similar benefits to Philippine carriers.

What types of revenues are included in the calculation of gross Philippine billings for international carriers?

The calculation of gross Philippine billings includes revenues from passengers, excess baggage, cargo, mail, and any other charges directly related to the transportation of goods or people on international flights or shipping operations originating from the Philippines.