BIR Ruling

November 10, 1972 Yap & Associates, CPAs Suite 309 Capt. Gonzaga Bldg. 414 Rizal Avenue, Manila Gentlemen : This refers to your letter dated October 19, 1972 requesting for a ruling regarding the following particular business: "FETC Corporation is a business agency for chartered flights and hotel accommodation. Below is an example of computation on how its income is derived. "Selling Price. Manila/Hongkong/London Flight $330.00 @ P6.75 P2,227.50 "Less Cost: Manila/Hongkong Ticket $70.30 @ 6.75 P474.52 Hongkong/London Ticket $182.00 @ 6.75 1,228.50 7% Commission given to agent 155.92 Hotel accommodation estimated to $17.00 @ 6.75 144.75 1,973.69 Income for FETC Corporation for services P253.69 ====== "The hotel and airline companies in return give us also commission. Let's say we receive P40.00 from airplane companies and P15.00 from hotels. We receive a total of P55.00 as commission." It is your belief that under the foregoing facts, FETC Corporation fall under the category of a business agent under Section 191(18) of the Tax Code and as business agent its gross receipts amounting to P253.69 is subject to the 3% tax while the amount of P55.00 is subject to the 6% tax as commission agent. aisadc In reply, I have the honor to inform you that under the foregoing facts, FETC Corporation is a commercial broker within the purview of Section 194(t) of the Tax Code and, therefore, subject to the annual fixed tax of P300.00 as prescribed in Section 182(A)(3)(bb) of the Tax Code and to the 6% tax of its gross compensation imposed in Section 195 of the same Code. The total amount paid by its customers less the cost of the ticket paid to the airline (actual cost less commission) constitutes its gross compensation which is subject to the 6% tax as commercial broker. Under the aforequoted computation, the gross compensation subject to 6% tax consist of the sum of P574.48 which is the difference between selling price of P2,277.50 and P1,703.02, and the latter representing the total cost of the tickets P474.52 and P1,228.50). Very truly yours, MISAEL P. VERA Commissioner of Internal Revenue