BIR Ruling [DA-246-06]

April 12, 2006 BIR RULING [DA-246-06] RR 30-2003; DA272-04 Society Models International Management Penthouse 802 Erechem Building V.A. Rufino corner Salcedo Streets Legaspi Village San Lorenzo Makati City Attention: Ms. Marichu C. Mambong Proprietress Gentlemen : This refers to your letter dated March 27, 2006 requesting for an opinion as to whether or not the talent fees to be received by a talent agent whose gross income is P9,074,048.50 as shown in his sworn declaration is subject to 15% creditable withholding tax as prescribed in Revenue Regulations No. 30-2003. ITSaHC In reply thereto, please be informed that income is calculated on the basis of the taxable year unless a different period is prescribed by law. The correct basis in imposing the tax is the taxable income actually received at the end of the taxable year/period. Thus, Section 2.57.2(A) of Revenue Regulations No. 2-98, as amended by Revenue Regulations No. 30-2003, provides that "(A) Professional fees, talent fees, etc.,for services rendered by individuals . On the gross professional, promotional and talent fees or any other form of enumeration for the services of the following individuals Fifteen percent (15%),if the gross income for the current year exceeds P720,000.00; and ten percent (10%),if otherwise; xxx xxx xxx Furthermore, in order to determine the applicable tax rate (10% or 15%) to be applied/withheld by the withholding agent, every individual professional/talent/corporate directors herein enumerated, shall periodically disclose his gross income for the current year to the Bureau of Internal Revenue (BIR) by submitting a notarized sworn declaration attached as Annex "A" hereof in three (3) copies (two (2) copies for the BIR and one (1) copy for the taxpayer),copy furnished all the current payors of the declaration duly stamped receive by the BIR (Collection Division of the Regional Office having jurisdiction over the place where the income earner is registered/Large Taxpayers Collection Division for large taxpayers in Metro Manila/LTDO for large taxpayers outside Metro-Manila).Sworn declaration may likewise be filed by the income payor on behalf of the professionals/talents/directors whose services were being rendered exclusively to the aforesaid payor. The disclosure should be filed on June 30 of each year or within fifteen (15) days after the end of the month the processional/talent/director's income reaches P720,000, whichever comes earlier. In case his total gross income is less than P720,000 as of June 30, he/she shall submit a second disclosure within fifteen (15) days after the end of the month that his/her gross income for the current year to date reaches P720,000. The payee-professional/talent/director shall furnish each payor a copy of the BIR duly stamped received sworn declaration not later than five (5) days from the date of receipt by the BIR. In case of failure to submit the June 30 annual declaration/disclosure to the BIR, and to furnish the payor/s a copy thereof, the payor shall withhold the tax at the rate of 15%. xxx xxx xxx Prescinding from the above-cited provisions, it is undisputed that the 15% or 10% withholding tax is based on the sworn declaration filed on June 30 or within fifteen (15) days after the end of the month the income payment reaches P720,000, whichever comes earlier. In the instant case, inasmuch as the gross income of the talent agent is P9,074,048.50 as shown in the sworn declaration for the calendar year 2004, this Office is of the opinion that the applicable rate of withholding tax is 15% which the payor shall deduct and withhold on the gross income earned by the talent agent. 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 null and void. Very truly yours, (SGD.) PABLO M. BASTES, JR. OIC-Head Revenue Executive Assistant Legal Service