REVENUE REGULATIONS GOVERNING THE IMPOSITION OF INCOME TAX ON THE GROSS PHILIPPINE BILLINGS, OTHER INCOME OF INTERNATIONAL AIR CARRIERS AND COMMON CARRIER’S TAX PURSUANT TO SECT…

SECTION 2.       Definition Of Terms. — For purposes of these Regulations, the following terms shall be construed as follows:

(a)            International air carrier — shall refer to a foreign airline corporation doing business in the Philippines
having been granted landing rights in any Philippine port to perform
international air transportation services/activities or flight
operations anywhere in the world.

(b)            Off-line carrier — shall refer to an international air carrier having no flight operations to and from the Philippines.

(c)            On-line carrier — shall refer to an international air carrier having or maintaining flight operations to and from the Philippines.

(d)            Off-line flights
— shall refer to flight operations carried out or maintained by an
international air carrier between ports or points outside the
territorial jurisdiction of the Philippines, without touching a port or point situated in the Philippines, except when in distress or due to force majeure.

(e)            On-line flights — shall refer to flight operations carried out or maintained by an international air carrier between ports or points in the territorial jurisdiction of the Philippines and any port or point outside the Philippines.

(f) Chartered flight — shall refer to flight operation which includes operations between ports or points situated in the Philippines and ports and points outside the Philippines, which includes block charter, placed under the custody and control of a charterer by a contract/charter for rent or hire relating to a particular airplane.

(g)            “Originating from the Philippines” — shall include the following:

(1)            Where
passengers, their excess baggage, cargo and/or mail originally commence
their flight from any Philippine port to any other port or point
outside the Philippines;

(2)            Chartered
flights of passengers, their excess baggage, cargo and/or mail
originally commencing their flights from any foreign port and whose stay
in the Philippines is for more than forty-eight (48) hours prior to
embarkation save in cases where the flight of the airplane belonging to
the same airline company failed to depart within forty-eight (48) hours
by reason of force majeure;

(3)            Chartered
flights of passengers, their excess baggage, cargo and/or mail
originally commencing their flights from any Philippine port to any
foreign port; and

(4)            Where
a passenger, his excess baggage, cargo and/or mail originally
commencing his flight from a foreign port alights or is discharged in
any Philippine port and thereafter boards or is loaded on another
aircraft, owned by the same airline company, the flight from the
Philippines to any foreign port shall not be considered originating from
the Philippines, unless the time intervening between arrival and
departure of said passenger, his excess baggage, cargo and/or mail from
the Philippines exceeds forty-eight (48) hours, except, however, when
the failure to depart within forty-eight (48) hours is due to reasons
beyond his control, such as, when the only next available flight leaves
beyond forty-eight (48) hours or by force majeure.  Provided,
however, that if the second aircraft belongs to a different airline
company, the flight from the Philippines to any foreign port shall be
considered originating from the Philippines regardless of the
intervening period between the arrival and departure from the
Philippines by said passenger, his excess baggage, cargo and/or mail.

(h)            “Continuous and Uninterrupted Flight”
— shall refer to a flight in the carrier of the same airline company
from the moment a passenger, excess baggage, cargo, and/or mail is
lifted from the Philippines up to the point of final destination of the
passenger, excess baggage, cargo and/or mail.  The
flight is not considered continuous and uninterrupted if transshipment
of passenger, excess baggage, cargo and/or mail takes place at any port
outside the Philippines on another aircraft belonging to a different
airline company.

(i) “Place of Final Destination”
— shall refer to the place of final disembarkation designated or agreed
upon by the parties in a contract of air transportation where the
passengers, their excess baggage, cargo and/or mail are to be
transported and unloaded by the contracting airline company.

(j)  “Transient Passengers”
— shall refer to a passenger who originated from outside of the
Philippines towards a final destination also outside of the Philippines
but stops in the Philippines for a period of less than forty eight (48)
hours, or even more than forty-eight (48) hours, if the delay is due to
force majeure or reasons beyond his control,
wherein in both cases the passenger boarded an airplane of the same
airline company bound to the place of final destination.

“Non-revenue passengers” — shall refer to the non-revenue passengers as defined under Resolution
No. 788 of the International Air Transport Association regarding Free
and Reduced Fare or Rate Transportation and any other Free/Reduced Rate
Mileage Programs Administered by individual International Air Carriers.

“Adult passenger” — shall refer to a passenger who has attained his twelfth birthday.

“Children” — shall refer to passengers who have attained their second but not their twelfth birthday.

“Infant” — shall refer to a passenger who has not attained his second birthday.

(k)            “Baggage” —
shall refer to such articles, effects and other personal property of a
passenger as are necessary or appropriate for wear, use, comfort or
convenience in connection with his trip.

“Excess baggage” — shall refer to that part of the baggage which is in excess of that baggage which may be carried free of charge.

(l)  “Refund” — shall refer to the repayment to the purchaser of all or a portion of the fare, rate or charge for unused carriage or service.

SECTION 3.       Foreign Airline Companies Without Flights Starting From Or Passing Through Any Point In The Philippines. —
An off-line airline having a branch office or a sales agent in the
Philippines which sells passage documents for compensation or commission
to cover off-line flights of its principal or head office, or for other
airlines covering flights originating from Philippine ports or off-line
flights, is not considered engaged in business as an international air
carrier in the Philippines and is, therefore, not subject to Gross
Philippine Billings Tax provided for in Section 28(A)(3)(a) of the Code
nor to the three percent (3%) common carrier’s tax under Section 118(A)
of the same Code.  This provision is without
prejudice to classifying such taxpayer under a different category
pursuant to a separate provision of the same Code.

SECTION 4.       Tax Imposed On International Air Carrier With Flights Originating From Philippine Ports.
— An international air carrier having flights originating from any port
or point in the Philippines, as clarified in Sec. 2(g) and (h) hereof,
irrespective of the place where passage documents are sold or issued, is
subject to the Gross Philippine Billings Tax of 2½% imposed under
Section 28(A)(3)(a) of the Code unless
subject to a different tax rate under the applicable tax treaty to which
the Philippines is a signatory.

SECTION 5.       Determination Of Gross Philippine Billings. —

(a)            In
computing for “Gross Philippine Billings”, there shall be included the
total amount of gross revenue derived from passage of persons, excess
baggage, cargo and/or mail, originating from the Philippines in a
continuous and uninterrupted flight, irrespective of the place of sale
or issue and the place of payment of the passage documents:

The gross revenue for passengers
whose tickets are sold in the Philippines shall be the actual amount
derived for transportation services, for a first class, business class
or economy class passage, as the case may be, on its continuous and
uninterrupted flight from any port or point in the Philippines to its
final destination in any port or point of a foreign country, as
reflected in the remittance area of the tax coupon forming an integral
part of the plane ticket.  For this purpose, the
Gross Philippine Billings shall be determined by computing the monthly
average net fare of all the tax coupons of plane tickets issued for the
month per point of final destination, per class of passage (i.e., first
class, business class, or economy class) and per classification of
passenger (i.e., adult, child or infant), and multiplied by the
corresponding total number of passengers flown for the month as declared
in the flight manifest.

For tickets sold outside the
Philippines, the gross revenue for passengers for first class, business
class or economy class passage, as the case may be, on a continuous and
uninterrupted flight from any port or point in the Philippines to final
destination in any port or point of a foreign country shall be
determined using the locally available net fares applicable to such
flight taking into consideration the seasonal fare rate established at
the time of the flight, the class of passage (whether first class,
business class, economy class or non-revenue), the classification of
passenger (whether adult, child or infant), the date of embarkation, and
the place of final destination.  Correspondingly, the Gross Philippine Billings for tickets sold outside the Philippines shall be determined in the manner as provided in the preceding paragraph.

Passage documents revalidated,
exchanged and/or endorsed to another on-line international airline shall
be included in the taxable base of the carrying airline and shall be
subject to Gross Philippine Billings tax if the passenger is lifted/boarded on an aircraft from any port or point in the Philippines towards a foreign destination.

The gross revenue on excess baggage which originated from any port or point in the Philippines
and destined to any part of a foreign country shall be computed based
on the actual revenue derived as appearing on the official receipt or
any similar document for the said transaction.

The gross revenue for freight or cargo and mail shall be determined based on the revenue realized from the carriage thereof.  The amount realized for freight or cargo shall be based on the amount appearing on the airway bill after deducting therefrom
the amount of discounts granted which shall be validated using the
monthly cargo sales reports generated by the IATA Cargo Accounts
Settlement System (IATA CASS) for airway bills issued through their
cargo agents or the monthly reports prepared by the airline themselves
or by their general sales agents for direct issues made.  The
amount realized for mails shall, on the other hand, be determined based
on the amount as reflected in the cargo manifest of the carrier.

Provided, however,
that in the case of the passenger’s passage documents or flights from
any port or point in the Philippines and back, that portion of revenue
pertaining to the return trip to the Philippines shall not be included
as part of “Gross Philippine Billings”.

In cases where a flight is interrupted by force majeure
resulting in the transshipment of the passengers, their excess baggage,
freight, cargo and/or mail to another airplane operated by another
airline company and transshipment takes place in another country, the
Gross Philippine Billings shall be determined based on that portion of
flight from the Philippines up to the point of said transshipment.

(b)            Non-revenue passengers shall not be given value for purposes of computing the taxable base subject to tax.  Refunded tickets shall likewise not be included in the computation of Gross Philippine Billings.

(c)            In
the case of a flight that originates from the Philippines but
transshipment of passenger, excess baggage, cargo and/or mail takes
place elsewhere in another aircraft belonging to a different airline
company, the Gross Philippine Billings shall be that portion of the
revenue corresponding to the leg flown from any point in the Philippines
to the point of transshipment.

(d)            In
computing the taxable amount, the foreign exchange conversion rate to
be used shall be the average monthly Airline Rate as provided in the
Bank Settlement Plan (BSP) Monthly sales report or the Bankers
Association of the Philippines (BAP) rate, whichever is higher.  The
average monthly BAP rate shall be computed by adding all the different
BAP rates during the month and dividing the same by the number of days
during the month.

SECTION 6.       Attachments To The Return.
— In the filing of the quarterly and annual GPB returns and the payment
of tax due thereon, there shall be attached to the quarterly/annual
returns, a Statement of Gross Philippine Billings duly certified by an
independent Certified Public Accountant, showing among others, the
Taxable Passenger Revenue for each flight number, the cumulative
quarterly/annual summary as well as the monthly summary totals of gross
revenue derived from the uplifts of passengers, excess baggage, cargo
and mails from the Philippines subject to tax under Section 28(A)(3)(a)
of the Code, the applicable average conversion rate mentioned in Sec.
5(d) hereof to arrive at the Taxable Gross Philippine Billings, and the
GPB rate used in arriving at the tax due for the quarter/year.

SECTION 7.       Schedules, Records And Documents Required To Be Kept.
— In addition to the quarterly schedule prescribed in Sec. 6 hereof,
other adequate schedules, records and documents, such as but not limited
to the following, shall be kept and maintained at all times in the
local principal office or place of business of the international airline
and shall be made available to the assigned internal revenue officers
for verification of the gross revenues reported for GPB tax purposes:

1.  Passenger
Flight Manifest showing date; Flight Number; the names of the passengers
grouped per each point of final destination as classified in accordance
with the classes of passage (whether first class, business class or
economy class) and further sub-grouped in accordance with the
classification of passenger ( whether adult, child, infant or
non-revenue);

2.  Monthly
Summary of Taxable and Non-Revenue Passengers Passenger Per Day; per
Flight Number showing the daily number of passengers per flight route on
each day and per each point of final destination grouped in accordance
with class of passage (whether first class, business class or economy
class) and classification of passenger (whether adult, child, infant, or
non-revenue);

3.  A complete
file of cargo/mail manifests in chronological order. Based on the cargo
and/or mail manifests, monthly schedules of mail revenue and cargo
sales reports must be prepared containing the following information:

A. Cargo/mail manifest should include information on:

(a)     Flight number;

(b)     Date and time of departure;

(c)     Destination of the aircraft;

(d)     Number of airway bills per flight;

B.      Semi-monthly Cargo Sales Reports should include information on:

(a)     Airway bill number;

(b)     Weight of cargo and the actual amount of revenue derived; and

(c)     Total amount of Cargo revenue for the sales period covering half month sales;

C.      Monthly Mail Revenue should include information on:

(a)     Weight of Mail and Freight rate per unit of measurement; and

(b)     Total amount of Mail Revenue for the month

4.  A complete
record of the income/revenue from excess baggage of passengers derived
in Philippine Pesos or applicable foreign currency;

5.  BSP Airline Billing Analysis Report containing the following information:

(a)     Name of travel agent;

(b)     Ticket number;

(c)     Gross fare of the ticket;

(d)     Fare Adjustments and Other Deductions;

(e)     Net fare derived by airline;

(f)      Philippine Travel Taxes and Miscellaneous Taxes and fees; and

(g)     Net amount payable to the airline company (including taxes and miscellaneous fees);

6.         Semi-Monthly
Sales Report for Direct Sales or Issues made by the airline company
and/or its General Sales Agent in the Philippines containing the
following information:

(a)     Ticket number;

(b)     Date of issuance of ticket;

(c)     Gross fare of ticket;

(d)     Fare adjustments and other deductions;

(e)     Net fare derived by airline;

(f)      Philippine Travel Taxes and miscellaneous taxes and fees; and

(g)     Net amount received (including taxes and miscellaneous fees).

7.  A complete
file of the tax coupons of airline tickets sold and ticketed in the
Philippines indicating the net fare paid by the travel agent/passenger;

8.  A file of charter agreements/contracts in the case of chartered flights;

9.  A complete
file of airline tickets issued based on incoming prepaid ticket advices
which plane tickets were sold outside the Philippines; and

10.           Copies of passenger manifests duly submitted to the Bureau of Immigration and Deportation.

SECTION 8.       Taxability Of Income Other Than Income From International Air Transport Services Mentioned In Sec. 5 Hereof.
— All items of income other than income from international air
transport services mentioned in Sec. 5 hereof shall be subject to tax
under the pertinent provisions of the Code.

SECTION 9.       Proof
Of Deductibility For Travel Expenses Claimed By Passengers As Well As
Freight Charges Incurred On Transport Of Cargoes By Airline Carriers.
— For purposes of validating the deductions claimed on travel expenses
incurred by passengers as well as freight charges incurred in the
transport of cargoes by international air carriers, the passenger coupon
of the plane ticket/airway bill which reflects the CAB rate shall not
be used as the basis for the claim of the expense.  The
amount of expense to be claimed shall be the actual cost incurred for
the purchase of the plane ticket/airway bill which is the net amount of
the ticket fare/airway bill after deducting the corresponding
fare/freight adjustments.  In the case of plane
tickets, if said tickets are purchased from travel agents, travel
expenses as claimed by the passengers shall be validated on the basis of
the sales invoice/official receipt issued by the travel agent
representing the actual cost of the ticket and the reasonable margin
added by the travel agent as payment for its services.

SECTION 10.    Common Carrier’s Tax Liability Of International Airline Companies.
— For purposes of determining the Common Carrier’s Tax liability of
international airline companies pursuant to Section 118 of the Code,
gross receipts shall be the same as the tax base for computing Gross
Philippine Billings Tax as prescribed by these Regulations.

SECTION 11.    Repealing Clause.
— The provisions of these Regulations expressly amend Revenue
Regulations No. 6-66 as well as all other existing rules and regulations
which are inconsistent herewith.

SECTION 12.    Effectivity Clause.
— These Regulations shall take effect fifteen (15) days after
publication in the Official Gazette or any newspaper of general
circulation, whichever comes first.

Adopted: 30 May 2002

(SGD.) JOSE ISIDRO N. CAMACHO
Secretary of Finance

Recommended by:

(SGD.) EDMUNDO P. GUEVARA
Deputy Commissioner of Internal Revenue Officer-in-Charge