BIR Ruling [DA-106-98]

March 26, 1998 BIR RULING [DA-106-98] Island Country Telecommunications, Inc. 8/F BA Lepanto Building Paseo de Roxas Makati City Attention: Mr . Andres M . Enverga General Manager Gentlemen : This refers to your letter dated July 15, 1997 stating that Island Country Telecommunications, Inc. (ICTI) is a domestic corporation duly registered with the Securities and Exchange Commission (SEC); that it has been awarded a franchise to operate and maintain electronic paging services in the Philippines by virtue of Republic Act No. 7939 dated July 25, 1994; that currently, its principal product is paging unit with the brand name "JasPage"; that ICTI has appointed independent distributors, dealers and direct sellers, who are not its employees, to distribute, promote, market and sell JasPage units and the paging services; that in consideration of the sale of the paging units and services, the distributors, dealers and direct sellers are entitled to receive commissions and bonuses. In connection therewith, you now request confirmation of your opinion that the commissions and bonuses paid to the distributors, dealers and direct sellers of the paging units and services are not subject to the expanded withholding tax. LLjur In reply, please be informed that your opinion is hereby confirmed. Pursuant to Revenue Regulations No. 6-85, as amended, otherwise known as the Revised and Consolidated Expanded Withholding Tax Regulations implementing Section 50(b) of the Tax Code [now Sec. 57(B) of the Tax Code of 1997], only payments to persons enumerated therein are subject to withholding tax. Considering that commissions and bonuses paid to the distributors, dealers and direct sellers by ICTI are not among those specified in said regulations, such commissions and bonuses are, therefore, not subject to the expanded withholding tax. (BIR Ruling No. 190-90 dated September 25, 1990) Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)