BIR Ruling

April 13, 1976 Reimbursement of Costs Incurred by Head Office Not Subject to 35% Withholding Tax This refers to your letter dated September 13, 1976 requesting a ruling from this Office as to whether or not the remittance of US$29,250 by XYZ Auto Products Philippines, Inc.,to XYZ Group of Companies, Owen and Rems, Ltd.,South Australia 5011, is subject to tax. From the documentary evidence presented to this Office, it is shown that the amount of US$29,250 is a reimbursement of the actual cost incurred by the head office, XYZ Group of Companies, Owen and Rems, Ltd.,representing payment for technical services which include air fares, salaries, living and sundry expenses of their six foreign technicians in connection with the installation of complex machineries in the factory of the Philippine subsidiary, XYZ Auto Products Philippines, Inc. It appears also that the corresponding withholding tax have been collected on the salaries of the foreign technicians who came to the Philippines, said salaries being considered income from sources within the Philippines. In reply, I have the honor to inform you that, it appearing that the said amount of US$29,250 not being income of, but is merely a reimbursement of the actual costs incurred by the Head Office XYZ Group of Companies, Owen and Rems, Ltd., the same is not subject to 35% withholding tax prescribed by Section. 24(b)(1), in relation to Section 53(b)(2) both of the Tax Code, as amended. cdasia