BIR Ruling [DA-405-03]

November 10, 2003 BIR RULING [DA-405-03] Section 57 (B) BIR Ruling No. 361-92 Nissan Motor Philippines, Inc . Nissan Technopark Barangay Pulong Sta. Cruz Sta. Rosa, Laguna Attention: Ms . Beth S . Alejandro General Accounting Manager Gentlemen : You stated in your letter dated November 19, 1998 that you are a domestic corporation engaged in the assembly and sale of Nissan passenger cars and commercial vehicles; that you advertise your products through different means, including radio and TV commercials; that advertising agencies assist you in these activities; that for your radio and TV commercials, the advertising agency issues its invoice to the advertiser, Nissan Motor Philippines, Inc. in this case, for the cost of airtime as billed by the radio and TV station plus its agency commission; that a copy of the radio and TV station bill supports the agency's invoice; that the bill of the radio and TV station shows the name of both the advertising agency and the advertiser; that your company pays the agency for the total invoice amount and in turn, the agency pays the radio and TV station for the airtime cost; and that the agency is the one who makes payment to and is issued an official receipt by the radio and TV station. In view of the foregoing, you now request for a clarification on who is required to withhold the 1% expanded withholding tax on the sale of radio and TV airtime and commercial spots the advertising agency or you, the advertiser. In reply, please be informed that the advertising agency is the withholding agent required to deduct and withhold the 1% (now 2%) creditable tax on income payments from the sale of TV and radio airtime and TV and radio commercial spots by TV and radio stations. The 1% (now 2%) withholding tax shall be based on the cost of airtime billed to you by the radio and TV station, imposed under Section 57(B) of the Tax Code of 1997, as implemented by Sec. 2.57.2(E)(4)(p) and (q) of Revenue Regulations No. 2-98, as amended by Revenue Regulations No. 6-2001, as amended by Revenue Regulations No. 12-2001. On the other hand, you are the withholding agent required to deduct and withhold the 1% (now 2%) creditable tax on your income payments to advertising agencies, exclusive of gross payments to media, pursuant to the same Code, as implemented by Sec. 2.57.2(E)(4)(h) of Revenue Regulations No. 2-98, as amended by Revenue Regulations No. 6-2001, as amended by Revenue Regulations No. 12-2001. Please be guided accordingly. AHcDEI Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group