BIR Ruling

December 21, 1971 A. R. Martinez & Associates Certified Public Accountants 205 El Hogar Filipino Building Manila Gentlemen : This refers to your letter dated November 11, 1971 requesting clarification as to whether or not BIR Ruling No. 71-009 dated July 12, 1971 which was published in the Manila Times issue of October 5, 1971 wherein this Office held that a corporation engaged in the business as insurance adjuster is subject to the 3% contractor's tax prescribed by Section 191 of the Tax Code, has superseded BIR Ruling No. 628 dated December 4, 1959; BIR Ruling No. 355 dated August 12, 1960, and BIR Ruling No. 385 dated September 7, 1960. In reply, I have the honor to inform you that BIR Ruling No. 628 dated December 4, 1959 has long been revoked. In that ruling, it was held that a management corporation was considered not falling under the category of the term "independent contractor". That ruling was based on the criteria that the normal function of an independent contractor is the performance of work predominantly physical in nature. However, this criteria was subsequently found contrary to the intent and purpose for which the term "independent contractor" is contemplated in Republic Act No. 1612, which is now construed to include all persons whose activity consists essentially of the sale of all kinds of services for a fee. Thus it is the position of this Office as contained in several earlier rulings that a corporation engaged in business as contractor, regardless as to whether or not the performance of which calls for the exercise or use of mental or physical or manual faculties of its employee or employees, falls under the category of "other independent contractor" under Section 191 of the Tax Code. Therefore, the management corporations previously held exempt from the 3% tax under BIR Ruling No. 628, dated December 4, 1959, BIR Ruling No. 355 dated August 12, 1960, BIR Ruling No. 385 dated September 7, 1960, and all similar BIR rulings are subject to the aforesaid tax. casia Very truly yours, MISAEL P. VERA Commissioner of Internal Revenue