Foreign airlines’ cargo VAT-exempt

Foreign airlines’ transport of cargo and passengers as well as trade of aircraft and vessels are exempted from the payment of the 12-percent value-added tax or VAT, according to the Bureau of Internal Revenue (BIR).

“The transport of passengers by international carriers doing business in the Philippines shall be exempt from VAT pursuant to Sections 109(1)(S) of the NIRC (National Internal Revenue Code or the Tax Code), as amended by RA (Republic Act) No. 10378,” read Revenue Regulations (RR) No. 15-2015 issued by BIR Commissioner Kim S. Jacinto-Henares last Dec. 28.

RR 15-2015 amended some provisions of RR 16-2005 or the consolidated VAT regulations.

To recall, RA 10378 signed by President Aquino in 2013 granted tax breaks to foreign carriers. Besides VAT exemption, international carriers are also exempted from paying the 2.5-percent gross Philippine billings tax or GPBT, a form of income tax applied to international airlines or shipping companies.

Also, the BIR said “the transport of cargo by international carriers doing business in the Philippines shall be exempt from VAT pursuant to Sections 109(1)(E) of the NIRC, as amended by RA 10378, as the same is subject to Common Carrier’s Tax (Percentage Tax on International Carriers) under Section 118 of the NIRC, as amended.”

Also VAT-exempt are the “sale, importation or lease of passenger or cargo vessels and aircraft, including engine, equipment and spare parts thereof for domestic or international transport operations,” according to the BIR.

However, the BIR said “the exemption from VAT on the importation and local purchase of passenger and/or cargo vessels shall be subject to the requirements on restriction on vessel importation and mandatory vessel retirement program of Marina (Maritime Industry Authority).” Ben O. de Vera