- 1
- Profits derived by an enterprise of one of the States from the operation of ships and aircraft in international traffic may be taxed in that State.
- 2
- However, such profits may also be taxed in the other State, but only in so far as such profits are derived from that other State. The tax so charged shall not exceed the lesser of
-
- a)the rate of 1½ per cent applied on the gross revenue derived from that other State, or
- b)the lowest rate of Philippine tax applied on such profits derived by an enterprise of a third State.
- 3
- For the purposes of this Article, profits derived from the other State mean profits as determined under its domestic law realised from the carriage of passengers, excess baggage, mail, livestock or goods boarded or loaded in that other State by a shipping enterprise doing business in that State of passage documents sold therein or from uplifts anywhere in the world by an international carrier doing business in that other State of passage documents sold therein, provided that in such cases the mail, livestock or goods originate from that other State. Profits realised from the carriage of passengers, excess baggage, mail, livestock or goods which are brought to that other State solely for transhipments, or for transfer from one aircraft to another or from an aircraft to a ship or from a ship to an aircraft shall not be included. Profits from chartered flights originating from that other State shall be deemed to be derived from that State regardless of the place of sale of the passage documents. For purposes of determining the taxability of profits from chartered fiights, the term "originating from that other State" shall include flights of passengers who stay in that other State for more than 48 hours prior to embarkation.
- 4
- The provisions of paragraphs 1, 2 and 3 shall also apply to profits from the participation in a pool, a joint business or an international operating agency.
