Deductibility of the Expanded Withholding Tax

January 22, 1988 BIR RULING NO. 006-88 51 (b) 108-86 006-88 Gentlemen : This refers to your letter dated September 29, 1987 stating that Soriamont Aircargo, a division of your company, is a licensed international airfreight forwarded; that one of its principal activities, is to solicit cargo from exporters/importers and buy the necessary space on behalf of the customers from airlines; and that the freight charge is then billed by the airlines to Soriamont Aircargo who is reimbursed of the same by the customers. In connection therewith, you now pose the following queries: "1. Should Soriamont deduct the expanded withholding tax when remitting freight charges to the Airlines? "2. Are the customers required to deduct the expanded withholding tax when reimbursing the freight charges to Soriamont?" In reply, please be informed that your first question is answered in the affirmative. Pursuant to Section 1(e)(2)(e) of Revenue Regulations No. 6-85 as last amended by Revenue Regulations No. 13-86, otherwise known as the Revised and Consolidated Expanded Withholding Tax Regulations implementing Section 51(b) of the Tax Code, gross payments to transportation contractors where the gross payment amounts to at least P2,000 per month, regardless of the number of shipments during the month, are subject to the expanded withholding tax of 1% beginning September 1, 1986. Accordingly, Soriamont, upon remittance to the airlines of freight charges amounting to at least P2,000 a month, regardless of the number of shipments during the month, should deduct and withhold the 1% expanded withholding tax. Your second question is answered in the negative. Under the expanded withholding tax law and regulations, gross payments to transportation contractors by their customers are not subject to the expanded withholding tax. Very truly yours, (SGD.) EUFRACIO D. SANTOS Deputy Commissioner