7925-2005-Bir Ruling No. 009-05
7925-2005-Bir Ruling No. 009-05
7925-2005-Bir Ruling No. 009-05
Gentlemen :
This refers to your letter dated October 18, 2001 stating that:
1. Dot Phone, Inc. (DPI) is a corporation registered under the laws of the British
Virgin Islands as a domain name service company for Philippine (PH)
domain names;
2. DPI is engaged in the business of performing PH domain name services
outside of the Philippines for PH domain name holders located inside of,
as well as outside of the Philippines, through PH domain name
servers/web servers also located outside of the Philippines;
3. Domain Merchandising Services, Inc. (DMSI) is a corporation duly organized
and
existing under and by virtue of the laws of the Republic of the Philippines; SIcEHD
In this particular case, the sources of DPI's income are the contracts between
DPI and the various resellers. Under these contracts, DPI has contracted outside of the
Philippines with various resellers located inside, as well as outside, of the Philippines
for the latter to offer for sale PH domain name services to be performed by DPI outside
of the Philippines for potential PH domain name holders located inside, as well as
outside, of the Philippines. Considering that the services that produce the income (i.e.,
registration and maintenance of PH domain names) are performed outside of the
Philippines, it follows that the income derived from the performance of such services is
not taxable in the Philippines.
3. DMSI, the Philippine collecting agent of DPI is likewise not subject to Philippine
taxation on fees collected by such agent in the Philippines, considering that such
fees are merely collected by such agent for and in behalf of DPI and to be
ultimately delivered to the latter.
Gross receipts subject to tax under the Tax Code do not include monies or
receipts entrusted to the taxpayer which do not belong to them and do not redound to
the taxpayer's bene t; and it is not necessary that there must be a law or regulation
which would exempt such monies and receipts within the meaning of gross receipts
under the Tax Code. (CIR v. Tours Specialists, Inc., G.R. No. 66416, March 21, 1990)
The PH domain name service fees collected in the Philippines by DMSI as agent
for and in behalf of DPI, therefore, do not constitute income of DMSI and are, in ne, not
subject to any form of Philippine taxation. However, the gross commission earned by
DMSI from said services is subject to the regular corporate income tax at the rate of
thirty-two percent (32%) pursuant to Section 27 (A) of the Tax Code of 1997. Moreover,
the services rendered by DMSI is subject to the ten percent (10%) value-added tax
imposed under Section 108 of the same Code. Furthermore, DMSI shall maintain a
separate book of accounts, and shall not issue its own of cial receipts, for the service
fees it collects for and in behalf of DPI.
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 null and void.CaHAcT