BIR issues new rule on tax exemption of airlines

MANILA, Philippines - International carriers may now apply for tax exemptions under Republic Act No. 10378, signed by President Benigno C. Aquino III on March 7.

This, following the Bureau of Internal Revenue’s (BIR) release of rules and regulations governing the exemption of foreign carriers from the three percent common carriers tax (CCT), the 2.5-percent Gross Philippine Billings Tax (GPBT), and value-added tax (VAT) previously levied against them.

“Pursuant thereto, international carriers may now avail of preferential rates or exemption from income tax on their gross revenues derived from the carriage of persons and their excess baggage based on the principle of reciprocity or an applicable tax treaty or international agreement to which the Philippines is a signatory,” BIR’s Revenue Regulations No. 15-2013 read.

“The policy behind the rationalization of taxes on international carriers is to improve the competitiveness of the Philippine tourism industry by encouraging more international carriers to maintain flight and shipping operations in the country and by the eventual reduction of international plane and ship fares. These are intended to facilitate the movement of goods and services and to attract more foreign tourists and investments,” the tax bureau said.