BIR Ruling [DA-071-05]

March 2, 2005 BIR RULING [DA-071-05] RMC-22-80 dtd 4/15/80 Mr. Rudy L. Magcalas, CPA Unit 808, Emerald Square Condominium J.P. Rizal St., cor P. Tuazon St. Project 4, Quezon City This refers to your letter dated October 4, 2004, in behalf of your client, VOYAGER TRAVEL AND TOURS, INC. relative to its problem on withholding tax in relation to their income derived from commission. It is represented that VOYAGER TRAVEL & TOURS, INC. is principally engaged as travel agency; that its income is mostly generated from commissions from its principal airlines: that one of its customers is the Senate of the Republic of the Philippines that the Senate as per your representation, is planning to effect withholding tax of 6%; 2% base on the amount of the airfare; that on the contrary, you earnestly believed that the basis for the withholding tax is on the commission (which is approximately about 10% on airfare); that you want to be clarified of the correct tax base of the withholding tax. In reply, please be informed that as can be observed, travel agencies, aside from following up travel papers of clients for which they are considered business agents subject to the value-added tax, also negotiate for airlines the transportation of their clients. From this latter activity, the travel agencies receive commission which is subject to the 10% withholding as they are commercial brokers under Section 2.57.2(G) of Revenue Regulations (RR) 2-98, as amended by RR 6-2001 and RR 12-2001. Accordingly, inasmuch as VOYAGER TRAVEL and TOURS, INC. acts as contractor for services rendered to its clients, for which it derives income subject to value-added tax and another as broker for negotiating or bringing about the sale of airline tickets to its passengers (the Senate of the Republic of the Philippines, among others) likewise deriving income by way of commission, the withholding tax on this particular activity of VOYAGER TRAVEL and TOURS, INC. as a commercial agent pursuant to Section 2.57.2(G) of Revenue Regulations (RR) 2-98 as amended by RR 6-2001 and RR 12-2001 shall be based on the gross commissions at the rate of 10%. 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. CacEIS Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group