June 13, 2008

BIR RULING [DA-361-08]

22 (1); 28 (B) (1); 42 (A) (4) (1); DA-32-02 Nissho (Singapore) Pte. Ltd. (Philippine Representative Office) Unit 704, 7/F Alabang Business Tower 1216 Acacia Ave., MBP, Ayala Alabang Muntinlupa City Attention: Ms. Doris Ng General Manager Gentlemen : This refers to your letter dated December 17, 2007 requesting for a ruling exempting Nissho (Singapore) Pte. Ltd. from the payment of corporate income tax, value-added tax and withholding taxes. It is represented that Nissho (Singapore) Pte. Ltd. {(Philippine Representative Office) (Nissho)} is duly licensed to transact business in the Philippines under SEC Registration No. FS200708111; that Nissho is registered with BIR RDO 053 with Tax Identification No. 252-204-919; that Nissho acts only as a Representative Office of Nissho (Singapore Pte., Ltd., a foreign corporation organized under the laws of the Republic of Singapore; that as a representative office, it only acts as a liaison office, deals directly with the clients of the parent company and undertakes activities such as information dissemination, promotion of products and services and quality control; and that as a representative office it derives no income from its activities. In reply, please be informed that a representative office is a non-resident foreign corporation not engaged in any income generating business in the Philippines. As can be viewed by its licensed activities, Nissho is a representative office. Accordingly, Nissho is not subject to income tax. Hence, it is exempt from filing of
Copyright 1994-2009 CD Technologies Asia, Inc. Philippine Taxation 2008 1

the corporate income tax return (BIR Ruling No. 136-89 dated July 4, 1989).

TIHDAa

A person is subject to VAT if it renders service "in the course of trade or business" (Section 105, 1997 Tax Code). Inasmuch as the operation of the representative office is similar to regional or area headquarters of multinational corporations which are exempt from VAT under Section 109 (p) of the 1997 Tax Code, representative offices are also exempt from VAT. Moreover, since Nissho Representative Office merely enables the overseas head office to maintain some presence in the country, and is not engaged in any income-generating activity in the Philippines, it is qualified for exemption from VAT. However, this exemption applies only to VAT directly due from representative offices (VAT Ruling No. 234-88 dated May 25, 1988 and BIR Ruling No. 136-89 dated July 4, 1989). On the other hand, please be advised that if you will remit technical service fees to your parent company, the said fees are considered royalties (Section 42 (A) (4) (f), 1997 Tax Code). Being Philippine source income of a representative office, the technical service fees are subject to Philippine corporate income tax at the rate of 32% (Section 28 (B) (1), Ibid.) which you will withhold as the payor-corporation and paid in the same manner and subject to the same conditions as provided in Section 59 of the 1997 Tax Code (Section 58, Ibid.) (BIR Ruling No. 136-89 dated July 4, 1989). Moreover, you are further advised that if you have employees, they are subject to the following income tax rates pursuant to Section 2.57.1 (D) of Revenue Regulations (Rev. Regs.) No. 2-98, as amended by Rev. Regs. 6-2001, as further amended by Rev. Regs. No. 12-2001, implementing Section 58 of the 1997 Tax Code: a. b. c. If a Filipino citizen, whether resident or non-resident, or a resident alien graduated tax rates of 5%-32%; If a non-resident alien engaged in trade or business in the Philippines graduated tax rates of 5%-32%; If a non-resident alien not engaged in trade or business in the Philippines 25% (BIR Ruling No. DA032-02 dated March 7, 2002).

This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered as null and void.
aCSHDI

Copyright 1994-2009

CD Technologies Asia, Inc.

Philippine Taxation 2008

Very truly yours, Commissioner of Internal Revenue By:

(SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service

Copyright 1994-2009

CD Technologies Asia, Inc.

Philippine Taxation 2008