BIR Ruling

September 27, 1972 Mr. Edgardo V. Certeza Executive Vice-President Certeza Surveying Co., Inc. 855 Epifanio de los Santos Ave. Quezon City S i r : This refers to your letter dated April 24, 1972 requesting the updating of the exemption granted to you from the payment of the 3% contractor's tax under BIR Ruling dated January 5, 1957. aisadc In reply, I have the honor to inform you as follows: In your letter dated March 27, 1967, you requested the reiteration of BIR Ruling dated January 5, 1957, holding that the Certeza Surveying Co., Inc. is not subject to the 3% contractors tax. In a letter-reply dated April 3, 1967, this Office informed you that said ruling has already been superseded; that a corporation which is engaged in the business of rendering surveying services to clienteles falls under the category of "other independent contractor" under Section 191 of the Tax Code; and that as such contractor, your corporation is subject to the annual fixed tax of P20.00 (now P50.00) prescribed in Section 182(A)(1) and to the 3% contractor's tax prescribed in Section 191, both of the Tax Code. In your letter dated May 4, 1967, you requested reconsideration of the aforesaid ruling of April 3, 1967. In support of your request for reconsideration, you stated that the findings of Bureau of Internal Revenue Collector Jose Aranas dated January 5, 1957 clearly exempt you from paying the 3% contractor's tax based on the reasons so presented then; that you have requested your Consultant Sycip, Gorres, Velayo & Co. to make a complete research regarding the ruling of this Office of April 3, 1967 holding you liable for the payment of the 3% contractor's tax; and that after an exhaustive study, Sycip, Gorres, Velayo & Co. is of the well-considered opinion that based on the same reasons you have submitted to former Commissioner Aranas, your company should not be subject to the 3% contractor's tax. In our letter-reply dated June 6, 1967 to your aforesaid request for reconsideration, we stated, viz.: "In reply, I have the honor to inform you that the services rendered by Certeza Surveying Co., Inc. fall squarely within the purview of independent contractors as contemplated by Republic Act No. 1612. The term 'independent contractor' includes all persons whose activity consists essentially of the sale of all kinds of services for a fee. "BIR Ruling dated January 5, 1957 which exempts your corporation from the payment of the 3% contractor's tax prescribed under Section 191 of the Tax Code has already been superseded. In fact, the rulings previously issued exempting corporations rendering land surveys had been already formally revoked. aisadc "It is now the position of this Office that a corporation should be distinguished from the professionals employed by it. Although the professionals who are employed and performing duties in such capacities are now exempt (subject now under Republic Act No. 6110) from the occupation tax if they do not practice their profession outside of their employment, pursuant to R.A. No. 4574, their exemption from tax does not, however, indicate that it is the corporation employing them which is engaged in the practice of their profession. "Finding no cogent reason to reconsider our ruling contained in our letter to you dated April 3, 1967, your request is hereby denied." This Office finds no legal basis to revoke the above ruling. You stated in your letter dated April 24, 1972 (and as stated by your lawyers, Bonifacio and Villaraza Law Offices in their letter dated December 25, 1956), your corporation is engaged in extending professional services in private land surveying, private and public land subdivisions and cadastre, including serial photogrammetric surveys; that in the fulfillment of your commitments to your clients your duly licensed surveyors whose professional taxes are paid by your company, perform professional skills in the exercise of their profession as surveyors; that in the exercise of their profession, they are bound by the Manual of Regulations laid down by the Bureau of Lands for all surveyors to follow; that in the case of subdivisions, the survey is conducted in accordance with the order of the landowner subject to the approval of the Bureau of Lands; and that in the case of relocations, the engagement is conducted in accordance with the science of surveying to indicate the technical descriptions previously approved by the Bureau of Lands. You admitted that the professional service is being done by your corporation and not by the surveyors employed by you. Although the surveyors do the surveying and other allied work, nevertheless, they actually render the work for your corporation and not for your clients. On the other hand, your corporation is the one to undertake the work for its clients. Under the circumstances, it cannot be said that the work comes under the category of professional services. For while it is true that the surveying work constitutes professional practice on the part of the surveyors, however, on the part of your corporation, the surveying work is certainly a non-professional service contemplated within the purview of the term "independent contractor" mentioned in Section 191 of the Tax Code. In view of all the foregoing, your request to reinstate or update the exemption granted to you on January 5, 1957, is hereby denied. Very truly yours, MISAEL P. VERA Commissioner of Internal Revenue