BIR Ruling [DA-268-01]

December 28, 2001 BIR RULING [DA-268-01] RA 9010 178-92; May 29, 1992 Dacy Architects/Planners Land and Property Consultants #69 Esteban Abada, Loyola Heights Quezon City Attention: Mr . Nestor S . David Senior Partner and General Manager Gentlemen : This refers to your letter dated March 2, 2001 requesting in effect for a ruling on whether or not you, as a duly registered professional partnership, is subject to value added tax (VAT for brevity) and withholding tax. In reply, please be informed that Section 1 of Republic Act No. 9010, as republished in Revenue Memorandum Circular No. 9-2001 deferred the imposition of the VAT on, among other things, services performed by registered general professional partnerships. Thus, SEC. 1. Section 5 of Republic Act No. 8424, as amended by Republic Act No. 8761, is hereby further amended to read as follows: "Sec. 5. Transitory Provisions Effectivity of the Imposition of VAT on Certain Services. The imposition of the value-added tax on the following services shall take effect on January 1, 2003 ; (a) Services performed in the exercise of profession or calling subject to the professional tax as provided for under Republic Act No. 7160, otherwise known as the Local Government Code of 1991, and professional services performed by registered general professional partnerships ; actors, actresses, talents, singers and radio emcees; radio and television broadcasters, choreographers; musical, radio, movie, television and stage directors, and professional athletes; xxx xxx xxx" (Emphasis supplied.) Accordingly, since you represent to be a duly registered general professional partnership, the services you render are not subject to VAT until December 31, 2002. Moreover, this Office has consistently ruled that general professional partnerships are exempt from withholding tax. In BIR Ruling No. 178-92 dated May 29, 1992, it was opined that: "In reply to your letter dated April 27, 1992, please be informed that your general professional partnership formed for the purpose of practising architecture is exempt from income tax pursuant to Section 24(a) of the Tax Code, as amended. Accordingly, payments to said partnership for professional services rendered are exempt from the withholding tax provisions of Revenue Regulations No . 6-85 otherwise known as the Revised and Consolidated Expanded Withholding Tax Regulations implementing Section 50(b) of the Tax Code, as amended. HCATEa xxx xxx xxx" (Emphasis supplied.) It is to be emphasized, however, that income payments made periodically or at the end of the taxable year by a general professional partnership to partners such as drawings, advances, sharing, allowances, stipends, etc. shall be subject to ten percent (10%) creditable withholding tax in accordance with Section 3 of Revenue Regulations No. 6-2001, amending Section 2.57.2 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 ascertained that the facts are different, then this ruling shall be considered void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal & Inspection Group