BIR Ruling [DA-027-00]

January 11, 2000 BIR RULING [DA-027-00] PMSC Limited 9 Temasek Boulevard #11-03 Suntec Tower 2 Singapore 038989 Gentlemen : This refers to your faxed message dated December 14, 1999 requesting information on withholding taxes on compensation. It is represented that a company was set-up in the Philippines which is a branch of PMS Ltd.; that PMSC Ltd. is a company incorporated in Delaware, U.S.A.; that said Philippine branch is licensed to transact business in the Philippines; that the Philippine branch has recruited seven (7) Filipino staff, that the salaries of these Filipino staff are directly paid from funds in Australia; that your company is seeking advice on the procedure of withholding taxes on compensation and if there is a need to register prior to the withholding of taxes on compensation. In reply, please be informed that the withholding of tax on compensation is a method of collecting the income tax at source upon receipt of the income. It applies to all employed individuals whether citizens or aliens, deriving income from compensation for services rendered in the Philippines. The employer is the one constituted as the withholding agent. (Section 2.78 of Revenue Regulation No. 2-98 dated April 17, 1998). Thus, the salaries of the Filipino staff for services rendered here in the Philippines shall be subject to withholding taxes on wages in accordance with Chapter XIII Title II of the National Internal Revenue Code of 1997. Likewise, you need to register as a withholding agent in the Revenue District Office having jurisdiction over the place of business of the Philippine branch. For your information and guidance, we are furnishing you a copy of Revenue Regulations. 2-98 dated April 17, 1998, Revenue Memorandum Circular No. 4-99 dated January 7, 1999 and Revenue Memorandum Order No. 54-98 dated June 1, 1998. Very truly yours, By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group