BIR Ruling [DA-316-04]

June 8, 2004 BIR RULING [DA-316-04] Pioneer Asia Insurance Corporation 4th Floor, A & T Building 244 Escolta Street, Binondo Manila Attention: Ms. Araceli R. Ballesfin Executive Vice President Gentlemen : This refers to your letter dated December 27, 2002 requesting for clarification of BIR Ruling No. DA171-2002 dated September 18, 2002 where this Office ruled that ". . . pursuant to Section 2.57.2(A)(5) of Revenue Regulations No. 2-98, as amended, a creditable withholding tax at the rate of 10% shall be withheld on the gross professional and talent fees or any form of remuneration for the services of insurance agents and insurance adjusters. However, if the services are performed by juridical persons, the rate of tax to be withheld is 5%, pursuant to said Section 2.57.2(B), in relation to Section 2.57.2(A)(5), both of Revenue Regulations No. 2-98, as amended. Accordingly, the income payments to Goldwings Insurance Agency, Inc., a juridical person, is subject only to 5% creditable withholding tax." In reply thereto, please be informed that after a careful re-study of the applicable laws and regulations, particularly Revenue Regulations Nos. 6-2001 and 12-2001, this Office finds the said ruling to be devoid of legal basis and without any force and effect. While it is true that under Revenue Regulations No. 2-98 and the precedent cited i.e. , BIR Ruling No. DA201-00 dated April 4, 2000, reveal that income payments to juridical entity is subject to five percent (5%) creditable withholding tax, this Office erred in not considering Revenue Regulations Nos. 6-2001 and 12-2001 which have amended Revenue Regulations No. 2-98 by increasing the rate of withholding tax on income payments to juridical entity from 5% to 10%. In this connection, it should be emphasized, that this Office issued the aforementioned ruling in good faith and without any intention to cause harm or injury to the parties concerned. ASHaDT IN VIEW OF THE FOREGOING, the subject BIR Ruling No. DA171-2002 dated September 18, 2002 issued to Mr. Edito F. Quejada for and in behalf of Goldwings Insurance Agency, Inc. insofar as the services of insurance agents and insurance adjusters which are performed by juridical persons are concerned and has been subjected to only 5% withholding tax, has to be, as it is hereby modified, to the effect that the withholding tax rate shall be the 10% CWT as prescribed under Revenue Regulations Nos. 6-2001 and 12-2001, amending Revenue Regulations No. 2-98. Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group