BIR Ruling

November 24, 1975 L. R. Pascual & Associates Certified Public Accountants Ledesma Bldg., Intramuros Manila Gentlemen : This refers to your letter dated October 7, 1975, requesting a ruling on the Taxability of the parties to the following proposed transactions: "ABC Travel Agency is not an IATA member. XYZ Travel agency is an IATA member and hence entitled to a 7% commission from airline companies for passage tickets issued to their customers. XYZ Travel Agency pays a 6% tax to the BIR on the gross commission received from the airline company. ABC Travel Agency then proposes to course its business dealings with the airline through XYZ Travel Agency and agrees to receive part of the commission from XYZ Travel agency on the commission (7%) it receives from the airline, net of the 6% tax paid to the BIR." Based on the foregoing facts, you posed this query: "Is ABC Travel Agency liable to pay the 6% tax on the commission received from XYZ Travel Agency considering the fact that the latter had already paid the same tax to the BIR?" In reply, I have the honor to inform you that ABC Travel Agency is a sub-broker of XYZ Travel Agency and as such sub-broker of XYZ, subject to 6% tax of the amount received by him from XYZ, the principal broker, even if XYZ had already paid the 6% tax on the total commissions received from airline companies, which included the amount received by ABC from XYZ, because the 6% tax is based on gross compensation, precluding any and all deductions. Since the gross compensation of XYZ was that received from airline companies and of ABC, that received from XYZ, both are liable to the 6% tax, to be based on the amounts received by them, without any deduction whatsoever. (Cf. P. J. Kiener Co. Ltd. vs. Araneta, G.R. No. L-16417, January 31, 1963). Very truly yours, (SGD.) EFREN I. PLANA Acting Commissioner of Internal Revenue TAN-1456-040-3 "TAXPAYERS SHOULD INDICATE THEIR TAN IN ALL COMMUNICATIONS TO THE BIR."