BIR Ruling

May 21, 1974 5th Indorsement Respectfully returned to the Honorable, the Secretary of Finance, Manila, the within papers bearing on the request of the Auditor General for comment or ruling on the issue of whether or not the express provision of the service contract entered into by and between the IBM (Philippines) Inc., and the Bureau of Lands, specifying that the Bureau shall pay for any taxes or fees, however designated or levied or based in addition to the agreed charges in the contract may be given due course. cdt This Office has already recognized that the 3% contractor's tax prescribed in Section 191 of the Tax Code may be shifted by the contractor to the contractee. However, in such event, the gross receipts of the contractor for purposes of the 3% contractor's tax consists of the entire amount received, that is, the contract price plus the tax shifted to the contractee. The 3% tax to be withheld shall be based on this amount which should be paid to the government and the balance remitted to the contractor. acd (SGD.) MISAEL P. VERA Commissioner of Internal Revenue TAN-1601-593-5