BIR Ruling [DA-104-04]

March 8, 2004 BIR RULING [DA-104-04] Frabelle Shipping Corporation 1051 North Bay Boulevard, Navotas, Metro Manila Attention: Valentino C. Labanda Accounting Department Head Gentlemen : This refers to your letter dated August 5, 2003 requesting for a clarification on the two percent (2%) withholding tax on the services rendered by banks, including the withholding on the interest payments on your loans in accordance with Revenue Regulations 17-2003 (RR 17-2003). In reply, please be informed that Section 3(M) of Revenue Regulations 17-2003 (RR 17-2003 for brevity), which took effect on June 1, 2003, specifically states that: "SEC. 3. Income Payments Subject To Creditable Withholding Tax . 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 goods and 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%) Top ten thousand (10,000) private corporations shall include a corporate taxpayer who has been determined and notified by the Bureau of Internal Revenue (BIR) as having the following criteria: xxx xxx xxx" In a letter dated June 1, 2003 by the Commissioner of Internal Revenue, through Deputy Commissioner and OIC for the Large Taxpayers Service, Estelita C. Aguirre, the BIR notified you that " you have been re-classified as one of the Top Ten Thousand (10,000) Private Corporations ." Thus, Frabelle, being one of the top ten thousand corporations, is mandated by the afore-quoted provision in RR 17-2003 to withhold two percent (2%) of all income payments made to its suppliers of services, such as in this particular case, services rendered by banks, including the withholding of 2% on the interest payments of your loans. Please be guided accordingly. HSDCTA Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group