BIR Ruling [DA-070-02]

April 18, 2002 BIR RULING [DA-070-02] 108 (A) VAT-078-92 Softworld Incorporated 17 Matulungin St. Central District, Diliman Quezon City Attention: Mr. Winston Chan General Manager Gentlemen : This refers to your letter dated November 7, 2001 requesting for a certificate from this Office certifying that your company is classified as WC-120 (Prime contractors/sub-contractors) subject to the 2% withholding tax on any derivable income payment. It is represented that Softworld Incorporated (Softworld) has served as a contractor providing computer-programming services since 1986; that it is hired by other companies to help develop their computer programming requirements; that last October, Punongbayan & Araullo (Punongbayan) contracted Softworld to develop their payroll software; that Punongbayan deducted 20% withholding tax from their payment; that Punongbayan classified Softworld under WC-250 and on BIR Form 1601-F, this particular ATC refers to "all kinds of royalty payments to domestic and resident foreign corporations"; and that since Softworld's inception, all its past and present clients have classified Softworld as WC-120 (prime contractors/sub-contractors). In reply, please be informed that persons engaged in the sale of computer services are subject to the 2% creditable withholding tax on income based on the gross amount received therefore, net of value-added tax, pursuant to Section 108(A) of the Tax Code of 1997 as implemented by Section 2.57.2(E)(3)(m) of Revenue Regulations No. 6-2001, as amended. (VAT Ruling No. 078-92 dated June 17, 1992) In view of the foregoing, this Office confirms your opinion that your company is classified as WC-120 (Prime contractors/sub-contractors) subject to the 2% creditable withholding tax on any derivable income payment. 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 as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal & Inspection Group