Use the Lexology Navigator tool to compare the answers in this article with those from other jurisdictions.
Air carrier operations
What procedural and documentary requirements must air carriers meet in order to operate in your jurisdiction?
A domestic air carrier must have:
- a legislative franchise or a certificate of public convenience and necessity from the Civil Aeronautics Board; and
- an air operator certificate from the Civil Aviation Authority of the Philippines.
A foreign air carrier must have:
- a foreign air carrier’s permit from the Civil Aeronautics Board; and
- a foreign air operator certificate from the Philippines Civil Aviation Authority.
Ownership and control
Do any nationality or other requirements or restrictions apply to ownership or control of air carriers operating in your jurisdiction?
A domestic air carrier is a public utility, subject to the nationality requirement that at least 60% of its equity (including at least 60% of its voting equity) should be owned by Philippine nationals. A foreign air carrier is not subject to this requirement and is allowed to engage only in foreign air transportation (ie, air transportation between the Philippines and any place outside it or wholly outside the Philippines).
What financial thresholds must air carriers meet to obtain operating authorisation?
The Civil Aeronautics Board requires domestic air carriers to have a minimum paid-up capital ranging from Ps10 million (for carriers with domestic non-scheduled flights) to Ps50 million (for carriers with domestic and international scheduled flights). Foreign air carriers must have paid-in equity capital of at least the equivalent of $200,000.
What is the required level of insurance coverage for air carrier operations?
Aircraft used in air carrier operations must have a valid insurance policy covering:
- the aircraft hull;
- each person, freight item and any mail onboard; and
- liability in favour of third parties.
In the absence of these requirements, the aircraft cannot be operated.
What safety requirements apply to air carrier operations, including with regard to professional and technical certifications?
The director general of the Philippines Civil Aviation Authority prescribes rules, regulations or minimum standards governing practices, methods and procedures that are necessary to provide adequately safe civil aviation. The director general has the power to issue:
- airmen certificates to individuals who possesses the proper qualifications for, and are physically able to, perform the duties pertaining to the position for which the airmen certificate is sought;
- airworthiness certificates for Philippine-registered aircraft, after it is found that the aircraft conforms with the appropriate type of certificate and is in a condition allowing for safe operation; and
- air operator certificates to air carriers that are properly and adequately equipped and have demonstrated the ability to conduct safe operations.
What environmental obligations apply to air carrier operations?
Air carriers must comply with the obligations imposed by Philippine environmental laws and regulations, including:
- the Republic Act 8749 (the Clean Air Act), which requires operators of aviation fuel storage tanks (which are considered a possible source of air pollution) to obtain a permit to operate air pollution source and control installations from the Department of Energy and Natural Resources;
- the Republic Act 6969 (the Toxic and Hazardous Waste Management Act), which requires a permit from the Department of Energy and Natural Resources for the storage, treatment, transport, export, processing, reprocessing, recycling and disposal of hazardous waste; and
- the Republic Act 9003 (the Ecological Waste Management Act), which provides for the mandatory segregation of solid waste to be conducted primarily at the source (eg, household, institutional, industrial, commercial and agricultural sources).
Air traffic control
How are air traffic control services regulated in your jurisdiction?
The Air Traffic Service of the Philippines Civil Aviation Authority provides air traffic control services implementing international standards.
Do any licensing requirements apply to specific routes?
A person or entity wishing to engage in air transport in the Philippines (including on specific routes) must submit an application to the Civil Aeronautics Board, together with the required documentation.
Are any public service obligations in place with respect to remote destinations?
There are no specific public service obligations on air carriers.
Do any special provisions apply to charter services?
Yes. Economic Regulation 2, which was issued by the Civil Aeronautics Board, specifically regulates both domestic and international charter services. It provides rules and regulations regarding authorisation for:
- charter trips;
- the amount of charter trips that may be performed;
- charter agreements; and
- applicable tariffs.
What taxes apply to the provision of air carrier services?
Income tax The income of a domestic carrier is subject to the regular corporate income tax for domestic corporations at the rate of 30% on all income received within or outside the Philippines, or a minimum corporate income tax of 2% on their gross income, whichever is higher or as otherwise provided in the legislative franchise granted to them.
The income of an international carrier doing business in the Philippines is generally subject to a 2.5% tax on its gross revenue derived from carriage of persons, excess baggage, cargo and mail originating from the Philippines on a continuous and uninterrupted flight, irrespective of the place of sale or issue and place of payment of the ticket or passage document. Lower rates may be applicable under tax treaties.
Value added tax and common carrier’s tax The transport of passengers and cargo by a domestic air carrier is subject to 12% value added tax on its gross sales. However, this excludes the transport of passengers and cargo by a domestic air carrier from the Philippines to a foreign country, which is subject to a 0% rate.
International air carriers doing business in the Philippines are subject to a 3% tax on their gross receipts derived from the transport of cargo from the Philippines to another country.
The taxes mentioned above are based on the National Internal Revenue Code, as recently amended. The amendments are expected to take effect on January 1 2018.
Click here to view the full article.