Top Rate Construction & General Services Incorporated

June 8, 2010 BIR RULING [DA-(C-019) 090-10] RMC 39-2007; DA-533-2007 Top Rate Construction & General Services Incorporated TLC Centre, 15 Aguirre Ave. BF Homes, Paraaque City Attention: Mr. Henry A. Pinca Manager of Accounting/Treasury Gentlemen : This refers to your letter dated February 16, 2009 stating that Top Rate is a domestic corporation duly registered with the Securities and Exchange Commission (SEC) under SEC Reg. Cert. No. 62784. Its primary purpose is to engage in the business as a contractor for construction work and providing general services to the public covering janitorial and messengerial work among others. It is likewise registered under the former DOLE Department Order No. 10 Series of 1997 and subsequently under DOLE Department Order No. 18-02 Series of 2002 as an independent contractor providing janitorial/messengerial services to its clients. You now request that Revenue Memorandum Circular (RMC) No. 39-2007 (Clarifying the Income Tax and VAT Treatment of Agency Fees/Gross Receipts of Security Agencies including the Withholding of Taxes Due thereon) be applied on all fours on the treatment of agency fees/gross receipts of independent contractors such as Top Rate Construction & General Services Incorporated (Top Rate for brevity) which is a supplier of janitorial and messengerial services. In reply, please be informed that it is basic in statutory construction that when the words of a statute are clear and unambiguous they must be held to mean what they plainly express. The statute must be literally construed ( Swarts vs. Siegel, 117 Fed. 13). Statutes creating a new liability or increasing an existing liability shall be strictly construed ( Millar vs. Town of Irondequot, 276 N.Y.S., 2d., 100). This is because tax laws operate to impose burdens on the public, or to restrict them in the enjoyment of their property and the pursuit of their occupations ( Alvea-Nichols vs. U.S., 12 F. 2d., 998). Thus, in the interpretation of such statutes it is the established rule not to extend their provisions by implication, beyond the clear import of the language employed, or to enlarge their scope as to include matters not specifically pointed out. IaHSCc There is nothing in the context of RMC No. 39-2007 that would manifest or suggest the intention to have the RMC apply to manpower agencies, i.e., janitorial and clerical services, other than security agencies. In fact, the RMC citing Section 1, Rule XIV of the 1994 Revised Rules and Regulations implementing Republic Act No. 5487, as amended, governing the "Organization and Operation of Private Security Agencies and Company Security Forces throughout the Philippines," places the primary obligation on the client to pay the salaries of the security guards and requires that the monies received by the security agency representing salaries shall be earmarked and segregated for the said guards, and not form part of the security agency's gross income and taxable gross receipts when actually or constructively received. On such basis, the security agency is placed on a tax situation different from other service providers. Thus, unless expressly mentioned in the issuance, the RMC cannot apply to agencies other than security agencies as specifically and expressly provided in its subject. (BIR Ruling No. DA 533-07 dated October 10, 2007) Very truly yours, Commissioner of Internal Revenue By: (SGD.) GREGORIO V. CABANTAC Deputy Commissioner Legal and Inspection Group