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Gentlemen :
This refers to your letter dated March 28, 1994 requesting for a ruling on the
taxability of your importation of one (1) Yokovlev 42D Trijet Aircraft under a lease
agreement between your company and Aviaexport of Moscow. cdta
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stipulated only upon signing of an additional mutual agreement by their authorized
representatives; that the price of leasing under the lease contract is U.S. $120,000
(One hundred twenty thousand U.S. Dollars) — per month; that payment under the
present contract is to be effected in U.S. Dollars fifteen (15) days prior to the delivery
of Leased Aircraft; and that the lessee will pay to the lessor the amount of U.S.
$360,000.00 (Three hundred sixty thousand U.S. Dollars only) in cash or in acceptable
guarantee.
"Sec. 11. Tax Provisions. — The grantee shall pay to the Philippine
Government during the life of this franchise, a franchise tax of five percent (5%)
of the gross revenues derived by the grantee from transport operations.
"(a) . . .
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gross passenger, mail, and freight revenues from its outgoing
flights shall be subject to this tax.
"The tax paid by the grantee under either of the above alternatives shall
be in lieu of all other taxes, duties, royalties, registration, license, and other
fees and charges of any kind, nature, or description, imposed, levied,
established, assessed, or collected by any municipal, city, provincial, or
national authority or government agency, now or in the future . . .".
the tax exemption privileges granted to Philippine Airlines shall automatically become
part of the franchise of Silangan Airways, Inc. and shall operate equally in its favor.
Such being the case, your lease of the subject aircraft under the lease
agreement shall not be subject to the value-added tax imposed under Section 101(a) of
the Tax Code, as amended.
LIWAYWAY VINZONS-CHATO
Commissioner of Internal Revenue
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