BIR Ruling

September 12, 1969 Atty. Thomas E. Morales Rm. 206-208 Wellington Ty Bros 602 Claro M. Recto Avenue Yangco Market, Manila S i r : This refers to your letter dated September 6, 1969 requesting information on the following facts: LexLib "A 100% Filipino owned Corporation engaged in the construction business was awarded a contract thru bidding to construct govt. roads, bridges and national highways. Later, in order to meet the target date of completion, the petty constructions such as soils leveling, landscaping, fencing and other sorts of erosion control, was subcontracted to another Corporation of the same business. Questions: 1. Is the receipts or contract price subject to 3% tax considering the fact that this is a government contract? 2. In the case of Sub-Contractor, is the Corporation also liable for said 3% tax? 3. If liable, is the payment received by the Sub-contractor always net of 3% tax? In reply, I have the honor to inform you that the principal contractor, as well as the subcontractor, of a single and the same construction work is subject to the 3% contractor's tax. In the case of the former, the tax is computed on the total amount received under the contract without deducting the amount paid by him to the subcontractor. In the case of the latter, the basis of the is the amount received by him from the principal contractor. (See P. J. Kiener Co., Ltd. vs. Commissioner of Internal Revenue, G.R. No. L-16417, prom. January 31, 1963; BIR Ruling Nos. 64-010 dated March 9, 1964 and 61-197 dated June 2, 1961). The fact that the government is the contractee does not believe the contractor from the duty of paying the 3% tax imposed in Section 191 of the Tax Code on his gross receipts derived from the contract, said tax being the direct and personal liability of the contractor. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue