BIR Ruling

January 23, 1968 Mr. J. V. Paculan 2565 Madre Perla Street, Vito Cruz Extension Manila S i r : This refers to your letter dated December 29, 1967 requesting information as to whether or not the gross receipts derived by a duly organized Filipino corporation engaged in engineering construction work under a contract entered into with the U.S. Army and Navy for the installation of U.S. Army and Navy projects is subject to the 3% contractor's tax. In reply, I have the honor to inform you that pursuant to the P.I. U.S. Military Bases Agreement of 1947 as supplemented by the exchange of notes between the Philippines and the United States Government on December 29, 1952, any person or entity who enters into a contract with the United States Army and Navy, as contractor, for the construction, operation, maintenance or defense of military bases is exempt from the 3% contractor's tax prescribed in Section 191 of the Tax Code. In this connection, if the services rendered by the abovementioned contractor is for the construction of military projects as defined under the Military Bases Agreement, the gross receipt derived therefrom is not subject to the 3% contractor's tax. The said contractor, however, remains subject to the income and additional residence taxes. cdta Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue