I.A. Campbell & Associates

April 18, 2008 BIR RULING [DA-254-08] Rev. Regs. #6-2001; BIR Ruling #006-2003 I.A. Campbell & Associates Unit 604 Cattleya Building 235 Salcedo St., Legaspi Village Makati City Attention: Pedro P. Garcia Vice President for Finance & Treasurer Gentlemen : This refers to your letter dated March 25, 2007 requesting confirmation of your opinion that I.A. CAMPBELL is a specialty contractor and therefore the professional fees received from its clients is subject to the creditable withholding tax rate of 2% effective October 1, 2001 (formerly 1%) pursuant to Section 3 of Revenue Regulations No. 6-2001, amending Section 2.57.2 (E) (3) of Revenue Regulations No. 2-98. It is represented that I.A. CAMPBELL & ASSOCIATES, INC. (I.A. CAMPBELL, for short), is a domestic corporation duly registered with the Securities and Exchange Commission on July 12, 1996, bearing SEC Registration No. A 1996 02329; that I.A. CAMPBELL is an independent firm of engineers, surveyors and architects of different fields; that under its Articles of Incorporation, its primary purpose is to engage in and carry out general consulting business on Construction Management, General Construction, Manufacturing and other projects: to act as managers or managing agents of persons, firms, associations, corporation, partnerships and other entities; to provide management, investment and technical advice for commercial, industrial, manufacturing and other kinds of enterprises, except the management of funds, securities, portfolio or similar assets of the managed entities or corporation. In reply thereto, please be informed that Section 3 of Revenue Regulations No. 6-2001, amending Section 2.57.2 (E) (3) of Revenue Regulations No. 2-98 defines the term "Specialty Contractor" as "(T)hose whose operations pertain to the performance of construction work requiring special skill and whose principal contracting business involves the use of specialized building trades or crafts." Gross payments to such persons are subject to creditable withholding tax at the rate of 2% (formerly 1%). In the case of Commissioner of Internal Revenue vs. The Court of Tax Appeals and Avecilla Building Corporation, 134 SCRA 49 (1985), the Supreme Court rules that a domestic corporation authorized to render "general scientific, engineering and technological services in all the various branches thereof including but not limited to evaluation, appraisal, market studies, project reports, management, consultation, construction supervision, training and/or engagement in any work or plan," is considered a specialty contractor under then Section 191 of the Tax Code, which lists the persons subject to the then contractor's tax. The aforementioned decision quoted the case of Hon. Efren I. Plana, in his capacity as Commissioner of Internal Revenue, petitioner, vs. Court of Tax Appeals and Engineering Development Corporation of the Philippines, G.R. No. L-52018, February 23, 1990. Based on the foregoing, this Office hereby confirms your opinion that I.A. CAMPBELL is a specialty contractor. Accordingly, as a specialty contractor, the professional fees that I.A. CAMPBELL receives for quantity surveying services, general construction consultancy and project management consultancy are subject to a creditable withholding tax at the rate of 2% effective October 1, 2001 (formerly 1%), in accordance with Section 3 of Revenue Regulations No. 6-2001, amending Section 2.57.2 (E) of Revenue Regulations No. 2-98. 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.) JAMES H. ROLDAN Assistant Commissioner Legal Service