BIR Ruling

November 13, 1970 Messrs. J. S. Zulueta & Co. Second Floor, Katigbak Bldg. A. Mabini Corner T.M. Kalaw Sts. Ermita, Manila Gentlemen : This refers to your letter dated November 13, 1970 stating substantially as follows: Your client, W. D. Scott & Co. Pty. Ltd. is a foreign corporation engaged in business in the Philippines as a management consulting company. It renders services within and without the Philippines to W. D. Scott & Co., Inc., a domestic corporation. It renders services abroad such as the preparation of training courses and materials which it transmits to the domestic corporation As a foreign company engaged in business in the Philippines, your client had been filing income tax returns on its income from sources within the Philippines and paying the corresponding income tax thereon. It is assigned the taxpayer account number 0107-1671-9. aisadc You now pose the following questions: (1) Whether or not the income of your client for services performed outside the Philippines and reimbursement of advances made by it are subject to Philippine income tax which should be withheld; and (2) Whether or not is income from services performed in the Philippines is subject to Philippine income tax subject to the withholding tax. In reply, I have the honor to inform you as follows: The income of your client for concrete and visible services such as the preparation of training courses and materials rendered abroad is not income from sources within the Philippines and, therefore, not subject to Philippine income tax. Not being subject to Philippine income tax, the remittance of such income to your client by the domestic corporation for whom it rendered the services shall not be subject to the withholding tax. The same holds true with respect to reimbursement of advances made by your client for the account of the domestic corporation, such advances being mere return of capital and not income. The income of your client for services performed in the Philippines is definitely subject to income tax, it being clearly income from sources in the Philippines. However, the remittance of such income to your client by the domestic corporation shall not be subject to withholding. As a foreign corporation engaged in trade or business in the Philippines, such income shall be reported by it in its income tax return pursuant to Section 46, in relation to Section 24(b) both of the Tax Code. cdt Very truly yours, MISAEL P. VERA Commissioner of Internal Revenue