Taxation, 2019 Bar — Question A.6

QUESTION

XYZ Air, a 100% foreign-owned airline company based and registered in Netherlands, is engaged in the international airline business and is a member signatory of the International Air Transport Association. Its commercial airplanes neither operate within the Philippine territory nor are its service passengers embarking from Philippine airports. Nevertheless, XYZ Air is able to sell its airplane tickets in the Philippines through ABC Agency, its general agent in the Philippines. As XYZ Air's ticket sales, sold through ABC Agency for the year 2013, amounted to P5,000,000.00, the Bureau of Internal Revenue (BIR) assessed XYZ Air deficiency income taxes on the ground that the income from the said sales constituted income derived from sources within the Philippines. Aggrieved, XYZ Air filed a protest, arguing that, as a non-resident foreign corporation, it should only be taxed for income derived from sources within the Philippines. However, since it only serviced passengers outside the Philippine territory, the situs of the income from its ticket sales should be considered outside the Philippines. Hence, no income tax should be imposed on the same. Is XYZ Air's protest meritorious? Explain. (5%)

You can write freely without an account. Sign in to reveal the suggested answer and track your progress.