Basis of the Withholding Tax Due on Film Rentals or Royalties Payable to Non-Resident Foreign Film Corporations

February 26, 1971 BIR RULING NO. 003-71 Basis of the withholding tax due on film rentals or royalties payable to non-resident foreign film corporations . It is contended that the 35% withholding tax should be based only on actually remittable amount under Central Bank regulations and not on the entire amount due and payable to the non-resident foreign corporation. This contention has no legal basis. Withholding tax is not dependent on remittance of the income payable to the non-resident foreign corporation but on accrual thereof. Such being the case, although a portion of the amount due to the non-resident foreign corporation cannot be remitted on account of Central Bank restrictions, the tax due on said portion should be deducted and withheld as if there is no restriction. " Restricted funds . In connection with the restriction on the transfer of funds from U.S. to persons in Norway, Denmark, the Netherlands, Belgium, Luxembourg and France, the tax should be withheld in the same manner as if no restriction existed. In custodian accounts, the name of the foreign bank or other foreign person should be entered on the ownership certificate, and an amended ownership certificate filed as soon as the actual owner is disclosed." (CCH, 1969, Vol. 5, par. 4875.405) In view thereof, this Office believes and so holds that the 35% withholding tax should be deducted and withheld on the entire amount of film rentals or royalties payable to the non-resident foreign film corporations including that portion which, on account of Central Bank restrictions, cannot as yet be remitted abroad. cdasia