BIR Ruling [DA-327-98]

July 17, 1998 BIR RULING [DA-327-98] Palafox Associates 9/F JAKA 6780 Ayala Avenue Makati City Attention: Mr . Lawrence Gabriel G . Santos Partner Gentlemen : This refers to your letter dated 19 September 1997 requesting for a Certificate of Exemption from withholding tax on your professional fees. You stated that you are a registered professional partnership engaged in the general practice of urban planning, site planning, architectural services, project development, interior designing, and consultancy to the public. casia In reply, please be informed that your general professional partnership formed for the purpose of practicing your common profession as architects is exempt from income tax pursuant to Section 26 of the Tax Code of 1997. Accordingly, payments to said partnership for professional services rendered are exempt from the withholding tax provisions of Revenue Regulations No. 6-85, as amended, otherwise known as the Expanded Withholding Tax Regulations implementing then Sec. 50(b) of the Tax Code, as amended (now Sec. 57(B) of the Tax Code of 1997, as implemented by Revenue Regulations No. 2-98) [BIR Ruling No. 160-91 dated August 21, 1991]. Your partners, however, shall be individually liable for income tax based on their respective share in the net profits of the general professional partnership during the taxable year, whether distributed or not, and the tax shall be paid in accordance with the provisions of Sec. 24(A), in relation to Sec. 74(A) of the Tax Code of 1997. Thus, income payments made periodically or at the end of the taxable year by a general professional partnership to the partners, such as drawings, advances, sharings, allowances, stipends, etc. shall be subject to the 10% expanded creditable withholding tax pursuant to Sec. 2.57.2(H) of Revenue Regulations No. 2-98. cd Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal & Enforcement Group