BIR Ruling [DA-116-03]

April 11, 2003 BIR RULING [DA-116-03] RR 2-98; 170-02 Office of the President Special Presidential Task Force 156 Rm. 503, 5/F EDPC Bldg. BSP Complex, Roxas Blvd., Manila Attention: Atty. Alan A. Ventura Executive Director Gentlemen : This refers to your letter dated February 26, 2003, requesting for a ruling on the applicable type of taxes/rates to be applied in the computation of the monthly withholding tax on the gross income of the workers of the Special Presidential Task Force 156 (SPTF 156) pursuant to a Contact of Service entered into by your alternate chairman and the workers. It is represented that the Contract of Service is on a monthly basis and shall be renewed as the need arises to undertake specific work to be accomplished within a prescribed period. In reply, please be informed that pursuant to Section 79 of the Tax Code of 1997, every employer making payment of wages shall deduct and withhold upon such wages a tax determined in accordance with the rules and regulations to be prescribed by the Secretary of Finance, upon recommendation of the Commissioner. Provided, however , That no withholding of a tax shall be required where the total compensation income of an individual does not exceed the statutory minimum wage, or Five Thousand Pesos (P5,000.00) per month, whichever is higher. Section 2.78.1 of Revenue Regulations No. 2-98 as amended, provides for the withholding tax on compensation income which applies to all employed individuals whether citizen or aliens deriving income from compensation for services rendered in the Philippines. The employer is constituted as the withholding agent. Likewise, pursuant to Section 2.78.3 of the same Revenue Regulations, "employee" is defined as an individual performing services under an employer-employee relationship. The term covers all employees, including officers and employees, whether elected or appointed of the Government of the Philippines, or any political subdivision thereof or any agency or instrumentality . . . . No distinction is made between classes or grades of employees . . . . Section 2.78.4 defines the term "employer" as any person for whom an individual performs or performed any service, of whatever nature, under an employer-employee relationship. It is not necessary that the services be continuing at the time the wages are paid in order that the status of employer may exist . . . . Such being the case, your workers, although not permanent employees, are subject to the withholding tax on compensation income at 5% to 32% depending on their monthly salary pursuant to Section 24(A)(1)(c) of the Tax Code of 1997 as implemented by Section 2.79(B)(3)(4)(5) of Revenue Regulations No. 2-98. Accordingly, you are required to deduct and withhold upon such wages a tax pursuant to the aforecited provision of the same Code. Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group