BIR Ruling

June 23, 1975 A. R. Martinez & Associates Certified Public Accountants 205 El Hogar Filipino Bldg. Manila Attention: Mr . Armando R . Martinez S i r : This refers to your letter dated March 21, 1975 requesting ruling as to whether the commissions received by the salesman are subject to the withholding tax on wages under the following facts: "1. A free-lance salesman will sell products of a company to specific customers which he has established permanent dealings with and will get commission from the Company for the effort. "2. In order to sell, the salesman, on his own initiative, will communicate with the customers, ask them about their requirements, get their purchase orders and deliver these purchase orders to the Company. "3. The company will invoice the customers for the products as shown in their purchase orders and will pay the salesman on the basis of collections that will be received by the Company from the customers." In reply, I have the honor to inform you that under the foregoing facts, there is no relationship of employer and employee between the Company and the free-lance salesman; hence, the commissions paid by the former to the latter are not subject to the withholding tax on wages under Supplement A, Title II of the Tax Code. The salesman should however, return for income taxation his income from said activity together with his other income. However, from the facts abovestated, there is brokerage relationship between the Company and the free-lance salesman, and therefore, the latter is subject to the fixed annual tax of P50.00 to be paid on or before January 20 and 6% tax on his gross commission or compensation, which should be returned for taxation within twenty days at the end of each quarter (See Section 195 in relation to Section 183 as amended by Presidential Decree No. 69). aisa dc Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue TAN-1601-593-5 "TAXPAYERS SHOULD INDICATE THEIR TAN IN ALL COMMUNICATIONS TO THE BIR."