BIR Ruling

March 5, 1969 SMG Trading Room 507 Paramount Building Rosario Street Manila Gentlemen : This refers to your letter of even date requesting in effect information as to whether or not the commissions you pay to your foreign correspondents are subject to Philippine income tax and necessarily to be withheld by you in accordance with Section 53 of the Tax Code. It is represented that you are brokers of domestic log producers-exporters. In connection with your operations as such brokers, you employ "foreign brokers" on "business correspondents". It is further represented that, by mutual understanding with your "foreign correspondents", the prices at which orders are booked will include a joint commission or mark-up which shall be shared equally between you and your correspondents. In reply, I have the honor to inform you that inasmuch as the services performed by your foreign correspondents are performed outside the Philippines, the commissions you pay to them are not considered income from sources within the Philippines and, therefore, are not subject to Philippine income tax pursuant to Section 24(b), in relation to Section 37(a)(3) of the Tax Code, as amplified by Section 155 of the Income Tax Regulations. Such being the case, the commissions that you shall remit to your foreign correspondents shall not be subject to the withholding provisions of Section 53 of the said Code. aisadc Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue