BIR Ruling

June 27, 1977 Services Rendered by a Professional in the Exercise of His Profession is Not Subject to the Contractor's Fixed and Percentage Taxes This refers to your request for exemption from the 3% contractor's tax prescribed by Section 191 of the Tax Code in connection with your contract with the National Irrigation Administration. Investigation disclosed that you are a registered Geodetic Engineer; that sometime in October, 1976 you entered into contract in your individual capacity with the National Irrigation Administration for a topographic survey of the NIA Irrigation Project in the Province of Iloilo for Irrigation Development Studies; that the services you are to undertake involve the following, to wit: 1. procurement and preparation of aerial photographs 2. a) establishment of basic horizontal and vertical controls b) establishment of photo controls 3. preparation of topographic controls a) preparation of topographic maps b) preparation of map index c) preparation of control map and that said services are limited to paper works and the actual works and executions thereof are to be undertaken by the National Irrigation Administration. In reply, I have the honor to inform you that under the foregoing facts, the topographic services to be rendered by you in connection with your contract with the National Irrigation Administration, constitutes a practice of your profession as geodetic engineer for which you are subject to occupation tax of P75.00, pursuant to Section 12 of P.D. No. 231 (Local Tax Code). Accordingly, you are not considered as an independent contractor and hence, not subject to the contractor's fixed and percentage taxes imposed under Sections 182(A)(1) and 191, both of the Tax Code. This being the case, the amount received by you from the NIA for the aforecited services are not subject to the withholding tax provision of Republic Act No. 1051. However, the income derived from said contract should be declared in your individual income tax returns for income tax purposes. cdasia