BIR Ruling [DA-512-03]

December 16, 2003 BIR RULING [DA-512-03] 57 DA-676-99 University of the Philippines College of Business Administration Diliman, Quezon City 1101 Attention: Prof. Gerardo Agulto, Jr . Gentlemen : This refers to your faxed letter dated July 12, 2001 stating "Please assist us in clarifying on the legally appropriate deduction the University, as withholding agent, is authorized to check off from payments for services rendered the University. Variously, these involve: (1) payments for professional fees, teaching or lecture fees/honoraria, etc. and (2) recipients who are regular/full-time University personnel, non-regular personnel ( e.g ., lecturers or speakers), or even total strangers to the University. Under (1), the payments at issue are not the regular or continuing salaries and benefits, but those arising from added or special-case work. Those under (2) can be further categorized into persons with pre-existing appointments from the University (like full-time and part-time faculty members), or those engaged under special agreements (usually one time, like rendering special architectural or engineering designing services)." In reply, please be informed that, where no employer-employee relationship exists, the University of the Philippines, as withholding agent, is required to deduct and withhold the creditable tax on income payments to engineers, architects and professors/teachers/lecturers/instructors/resource persons at the rate of 10% or 5%, as the case may be, pursuant to Section 3(A)(8) and (B) of Revenue Regulations No. 2-98, as amended. The withholding taxes or money/income payments are required to be paid/emitted on or before the 10th day of the month following the month in which withholding was made. The amounts subject to withholding tax shall include not only fees, but also per diems, allowances and any other form of income payments not subject to withholding tax on compensation . However, if an employer-employee relationship exist between the University of the Philippines and the engineers, architects and professors/teachers/lecturers/instructors/resource persons, the professional fees, teaching or lecture fees or honoraria form part of their gross compensation and subject to income tax on wages under Revenue Regulations No. 2-98, as amended, shall be computed pursuant to Section 24(A)(1)(c) of the Tax Code of 1997, in accordance with and at the rates established in the following schedule less applicable personal exemption: TADcCS Not over P10,000 5% Over P10,000 but not over P30,000 P500 + 10% of the excess over P10,000 Over P30,000 but not over P70,000 P2,500 + 15% of the excess over P30,000 Over P70,000 but not over P140,000 P8,500 + 20% of the excess over P70,000 Over P140,000 but not over P250,000 P22,500 + 25% of the excess over P140,000 Over P250,000 but not over P500,000 P50,000 + 30% of the excess over P250,000 Over P500,000 P125,000 + 34% of the excess over P500,000 in 1998 Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group