BIR Ruling

July 17, 1972 Miss Rose Duavit Cruz Administrative Director Cultural Center of the Philippines Manila M a d a m : This refers to your letter dated June 9, 1972 requesting that the Cultural Center of the Philippines be exempted from its obligation to withhold income tax due on its remittances to Bolt, Beranek, and Newman Inc., 50 Moulton St., Cambridge 38, Massachusetts, U.S.A., involving the total amount of $23,151.70 for professional accoustics consultation services rendered by the latter in connection with the construction of the Center. You contend that the contract of the Center with the foreign company is that its service fee shall be net of Philippine income tax, and that the Cultural Center is itself free from tax in accordance with BIR Ruling dated January 25, 1968. In reply thereto, I regret to inform you that your request cannot be granted for lack of legal basis. It should be noted that the aforesaid remittances constitute compensation for services rendered in the Philippines by a foreign company not engaged in trade or business in this country. Since the compensation is considered income from sources within the Philippines, the foreign company is liable for the payment of the income tax thereon. (Sec. 24(b), Tax Code). Such being the case, the Cultural Center is subject to withholding tax for having the control, receipt, custody, disposal or payment of said compensation. Very truly yours, MISAEL P. VERA Commissioner of Internal Revenue