BIR Ruling

June 4, 1976 MEMORANDUM FOR: The Chief, Services and Miscellaneous (Audit) Division BIR, Manila There is referred to you herewith for appropriate action and recommendation the letter dated December 16, 1975 of Atty. J.U. Ong, S.G.V. & Co., P. O. Box 589, Manila 2800, requesting for a ruling as to whether or not the service fees payable by their client, Ayala Corporation, to Guthrie Corporation Ltd., for professional services rendered in Kuala Lumpur, Malaysia, is exempt from the withholding at source. In this connection, you are hereby instructed to conduct an investigation with a view to A. Verifying in said letter (1) that Guthrie joined SGV in undertaking a study on the conversion of the Acme and Apitong Lumber Concession of Ayala in Palawan into a Palm Oil Plantation (2) that Guthrie worked on the feasibility study on planting and processing palm oil in Palawan at its principal office in Kuala Lumpur; and (3) that the parties agreed that the professional fee shall be $16,000.00, $8,000.00 for SGV and $8,000.00 for Guthrie. B. Verifying the documentary evidence mentioned in said letter. C. Ascertaining whether or not the entire professional services of Guthrie were rendered outside of the Philippines and whether or not the fee of $8,000.00 were really for services rendered outside of this country. You are further directed to submit with your report the following: (a) Copies of letters, cablegrams, memoranda and other communications sent by the corporations to each other; (b) Copies of the quarterly income tax returns filed by Ayala Corporation for the year 1975. In this connection, your attention is invited to the fact at under Section 24(b)(1) of the Tax Code, as amended by Presidential Decree No. 778, remunerations for foreign technical services rendered in the Philippines by foreign corporations, it engaged in trade or business in the Philippines, are subject to income tax equal to 35% of the gross income received during such taxable year from all sources within the Philippines, and subsequently, those paying to such non-resident foreign corporations should withhold from the amounts payable to the latter 35% hereof, pursuant to Section 53(b)(2) of the Tax Code. Report hereon should be submitted on or before June 30, 1976. CONRADO P. DIAZ Deputy Commissioner of Internal Revenue TAN-1182-568-4