Ms. Helen R. Dabao

January 23, 2007 BIR RULING [DA-033-07] DA 075-05 Ms. Helen R. Dabao Artes International Inc. 4397 Montojo Street Makati City M a d a m : This refers to your letter dated December 20, 2006 stating that Artes International, Inc. is a domestic corporation duly registered with the Securities and Exchange Commission (SEC): that it is engaged primarily in the service of the following, to wit: (a) Corporate Events Management; (b) Promotional Activities; (c) AVP Production and Presentation; (d) Exhibit Design and Execution; (e) Stage Direction and Design; that the objectives of the company are as follows: 1. to provide entertainment packages and audio-visual presentations in line with the goals and objectives of the client/company; 2. conceptualize the activities of an event to reinforce and further enhance the good image of the client/company; and 3. efficiently and effectively manage the activities of an event to meet the needs of the client/company. that the company has entered into several contracts with different clients, whether private or government institutions, covering technical services and equipment rentals for local and international conferences. In connection therewith, you now request for an opinion that the income payments to be received by your company, as an event organizer, are not subject to the creditable withholding tax as professional, talent or contractor as prescribed in Revenue Regulations No. 2-98, as amended, but nevertheless are classified as payment to supplier of services subject to the 2% withholding tax on income payments made by the top 10,000 private corporations and government offices, national or local, pursuant to Section 3 (M) and (N) of Revenue Regulations No. 17-2001. In reply thereto, please be informed that income payments received by your company, as event organizer, is not one of those enumerated in Revenue Regulations No. 2-98, as amended, as it is neither professional, talent or contractor, and therefore not subject to the creditable withholding tax. However, Section 3 (M) and (N) of Revenue Regulations No. 17-2001, amending Revenue Regulations No. 2-98, provides that "Sec. 3. Income Payments Subject to Creditable Withholding Tax. Sec. 2.57.2 of Revenue Regulations No. 2-98, as amended, is hereby further amended to read as follows: xxx xxx xxx (M) Income payments made by the top ten thousand (10,000) private corporations to their local/resident supplier of goods and local/resident supplier of services other than those covered by other rates of withholding tax. Income payments made by any of the top ten thousand (10,000) private corporations, as determined by the Commissioner, to their local/resident supplier of services, including non-resident alien engaged in trade or business in the Philippines. Supplier of goods One percent (1%) Supplier of services Two percent (2%) xxx xxx xxx (N) Income payments made by the government to its local/resident supplier of goods and local/resident supplier of services other than those covered by other rates of withholding tax. Income payments, except any casual or single purchase of P10,000.00 and below, which are made by a government office, national or local, including barangays, or their attached agencies or bodies, and government-owned or controlled corporations, on their purchases of goods and purchases of services from local/resident supplier Two percent (2%). A government-owned and controlled corporation shall withhold the tax in its capacity as a government-owned and controlled corporation rather than as a corporation stated in Subsection (M) hereof." A reading of the above regulations disclosed that indeed, an event organizer, like your company is a supplier of services. Consequently, income payments made by the private corporations and/or government offices are subject to the 2% withholding tax. IN VIEW OF THE FOREGOING , this Office hereby holds that payments made by your clients, whether private or government institutions, for the technical services and the installation of equipment, are classified as payment to supplier of services subject to the 2% creditable withholding tax prescribed in Revenue Regulations No. 17-2001. cCSDaI This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service