BIR Ruling [DA-239-03]

July 24, 2003 BIR RULING [DA-239-03] Section 236 (B); BIR Ruling No. 098-99 CAP CAP Legaspi Building 149 Legaspi St., Legaspi Village Makati City Attention: Atty. Gregorio V. Marquez Vice-President Head, Integrated Legal Affairs Operations Gentlemen : This refers to your letter dated June 16, 2003 requesting for a ruling on whether your sales agents are exempt from the payment of registration fee as prescribed under Section 236(B) of the Tax Code of 1997 pursuant to Revenue Regulations (Rev. Regs.) No. 11-2000. It is represented that your company is engaged in the pre-need business; that you regularly hire individuals nationwide as sales agents; that they are purely compensated with commissions based on production; that as potential income earners, they are required to register as taxpayers under Section 236(B) of the Tax Code of 1997 and secure tax identification numbers (TIN); that many of your sales agents have no previous earnings and therefore are new applicants for registration with the appropriate Regional District Office (RDO); that although there is a registration fee in the sum of P500.00, it is your understanding that your sales agents are not liable for this fee since they are individuals earning purely compensation income; that their activities are considered principally for subsistence or livelihood and, therefore fall under the category of "marginal income earners"; that based on the experience of your sales agents when they apply for a TIN, some RDOs require the payment of the above P500.00 registration fee despite the exemption granted under Rev. Regs. No. 11-2000, while other RDOs do not require the same; and that many of your sales agents could not get a TIN for their inability to pay the P500.00 fee. In reply, please be informed that pursuant to Rev. Regs. No. 11-2000, the term "marginal income earners" was qualified in the light of the declared policy of the State to free people from poverty through policies that promote full employment, rising standard of living and an improved quality of life. Hence, the same regulations provide that the activities of "marginal income earners," referring to individuals not otherwise deriving compensation as an employee under an employer-employee relationship but who are self-employed and deriving gross sales/receipts not exceeding P100,000.00 during any 12-month period, are considered principally for subsistence or livelihood and not "in the course of business." Accordingly, your sales agents, provided they qualify under the aforestated definition, although still required to register, shall nevertheless be exempted from the payment of the registration fee as prescribed under Section 236(B) of the Tax Code of 1997, pursuant to Rev. Regs. No. 11-2000. SECcAI 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 as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group