BIR Ruling [DA-073-06]

March 2, 2006 BIR RULING [DA-073-06] RR 14-02 DA-526-2003 CEZ's General Merchandise 477 MacArthur Highway Dalandan, Valenzuela City Attention: Mr. Cesar Tiu Proprietor Gentlemen : This refers to your letter dated September 28, 2005 requesting a particular issuance or BIR Regulation requiring the payor of wharfage to deduct withholding tax of 2% on said payments due to the insistent demand of Philippine Ports Authority before the 2% withholding tax can be deducted. In reply thereto, please be informed of the provisions of Sections 3 and 4 of Revenue Regulations No. 14-02 which provide: "SEC. 3. Persons required to deduct and withhold . Section 2.57.3 of Revenue Regulations No. 2-98 is hereby amended to read as follows: "Sec. 2.57.3. Persons required to deduct and withhold . The following persons are hereby constituted as withholding agents for purposes of the creditable tax required to be withheld on income payments enumerated in Section 2.57.2: (A) In general, any juridical person, whether or not engaged in trade or business; (B) An individual, with respect to payments made in connection with his trade or business. However, insofar as taxable sale, exchange or transfer of real property is concerned, individual buyers who are not engaged in trade or business are also constituted as withholding agents; (C) All government offices including government-owned or controlled corporations, as well as provincial, city and municipal governments and barangays." "SEC. 4. Exemption from Withholding . Section 2.57.5 of Revenue Regulations No. 2-98 is hereby amended to read as follows: "Sec. 2.57.5. Exemption from Withholding . The withholding of creditable withholding tax prescribed in these Regulations shall not apply to income payments made to the following: (A) National government agencies and its instrumentalities including provincial, city, municipal governments and barangays except government-owned and controlled corporations." xxx xxx xxx It is worth mentioning that CEZ's General Merchandise is constituted under the law as a withholding agent required to withhold the tax on income payments subject to withholding tax. However, payments to government agencies and instrumentalities are exempt from the withholding tax prescribed under Section 2.57.2 of Revenue Regulations No. 2-98. The Philippine Ports Authority is a government agency. As such, it is not subject to the withholding tax prescribed under Section 2.57.2 of Revenue Regulations 2-98, as amended by Section 4 of Revenue Regulations No. 14-02. (BIR Ruling No. DA-526-2003 dated December 22, 2003) IcHTAa Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service