BIR Ruling

October 19, 1973 Messrs. Joaquin Cunanan & Co. Certified Public Accountants P. O. Box 2288 Manila Gentlemen : This refers to your letter dated May 29, 1973 requesting a ruling based on the following facts: acd "M Company would enter into a management agreement with X Company for which the latter would pay the former a certain fixed amount as management fee. "X Company needs a competent and highly qualified expert, say a financial consultant. "M Company happens to have an executive of the caliber which X Company needs in the person of Mr. A. "M and X companies now agree, verbally or in writing, but independent of, and separate from their management agreement that M Company would allow Mr. A to work with X Company. "It is specifically understood that the loaning of Mr. A to X Company has no connection in any manner whatsoever with the management agreement of M and X companies. "While Mr. A would work with X Company, M Company, however, would continue paying Mr. A what he has been receiving from M Company: basic salary, bonus, allowances and all other fringe benefits he is entitled to from M Company. "What M Company pays to Mr. A, X Company would reimburse to M Company. "On the basis of the foregoing facts, what, for purposes of the contractor's tax would be the basis of the 3% tax of M Company, the management fee only or the management fee plus reimbursement by X Company to M for Mr. A's compensation." In reply, I have the honor to inform you that under the foregoing facts, the basis of the 3% contractor's tax payable by M Company consists of the management fee exclusive of the amount reimbursed by X Company to M for Mr. A's compensation. 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."