BIR Ruling [DA-676-99]

December 10, 1999 BIR RULING [DA-676-99] Foreign Service Institute 2330 Roxas Boulevard Pasay City Attention: Mr . Samuel T . Ramel Acting Director Gentlemen : This refers to your letter dated October 27, 1998 stating that the Foreign Service Institute (FSI) was established by virtue of Presidential Decree No. 1060; that one of its mandates is to serve as center for the development and professionalization of the career foreign service corps; that in carrying out this objective, the Institute conducts different types of training programs which are attended by participants from the Department of Foreign Affairs and other government agencies; that in the conduct of these programs, FSI invites lecturers/instructors/resource persons, both from the private and public sectors, who are paid honoraria computed on hourly basis; and that the said lecturers/instructors/resource persons are issued letters of invitations indicating therein the nature of the program, topic to be discussed, period of involvement and rate of honoraria. cdlex You are now requesting for a ruling as to whether or not the honoraria received by the above lectures/instructors/resource persons are subject to withholding tax. In reply, please be informed that pursuant to Section 2.57.2(A)(8) and (B) of Rev. Reg. No. 2-98 you are a withholding agent required to deduct and withhold the creditable tax on your income payments to said lecturers/instructors/resource persons at the rate of 10% or 5% as the case may be. However, where the relationship of the employer and employee exists between the FSI and the lecturers/instructors/resource persons, FSI being the income payor of the latter, is the withholding agent of the Bureau of Internal Revenue. Accordingly, the honoraria form part of their gross income and the tax 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. 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 P40,000 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 provided, that effective January 1, 1999, the top marginal rate shall be thirty three percent (33%) and effective January 1, 2000, the said rate shall be thirty two (32%). Please be guided accordingly. llcd Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)