BIR Ruling

June 20, 1972 Revenue District Officer Revenue District No. 17 Olongapo City Attention: Mr . Orlando B . Cobangbang Revenue Examiner II #786 S i r : This refers to your letter dated May 22, 1972 requesting. for a ruling as to whether that Office is justified in requiring the disbursing officer of the U.S. Naval Base at Subic Bay to implement the provisions of the Withholding Tax Law in respect to salaries of Filipino employees working in the Base. You stated that the employees concerned have requested the implementation of the withholding tax provisions on them because they find it difficult to pay in lump sum their income tax at the time they file their income tax return. In reply thereto, you are informed in the affirmative. For purpose of the Withholding Tax Law, an employer is any person for whom an individual performs or performed any service of whatever nature as the employee of such person. (Art. 1 (d), Supplement A Withholding on Wages) An employer may be an individual, corporation, partnership, trust, estate, joint venture or other unincorporated organization, group or entity. It includes organizations which are themselves exempt from income tax, such as religious and charitable organizations, educational institutions, clubs or social organizations as well as the Government of the Republic of the Philippines, including its agencies, instrumentalities, and political subdivisions. (Sec. 6, Revenue Regulations No. V-8, Withholding Tax Regulations). For this reason, it is believed that U.S. Bases here in the Philippines and other tax exempt international organizations may be considered employers within the purview of the withholding tax provisions. It is true that compensation paid for services in the United States government offices, military establishment and naval bases are exempted from the requirements of the withholding tax provisions. However, this is true only if the compensation is exempt from income tax. (Sec. 3(e), Revenue Regulations No. V-8) In the case of the Filipino laborers working in U.S. Bases, their wages or salaries are subject to Philippine income tax. Such being the case, U.S. Military Bases in the Philippines are subject to the requirements of the withholding tax provisions in respect to compensation received by Filipino employees working in the bases. aisadc Very truly yours, MISAEL P. VERA Commissioner of Internal Revenue