BIR Ruling No. 018-61

January 24, 1961 BIR RULING NO. 018-61 In reply to your letter . . ., I have the honor to inform you as follows: cdt For internal revenue tax purposes, a "sub-contractor" who engages in business or occupation in the construction of roads, drainage canals and other related works, is considered a contractor, subject to the income, fixed and percentage taxes in accordance with the provisions of the Tax Code, as amended, and to the basic and additional residence taxes pursuant to the Residence Tax Law, as amended. FIXED TAX . Before engaging in business as such, the taxpayer must pay a fixed annual tax of P20.00 [Sec. 182(A)(1)], payable at his option annually, on or before the 20th of January, or semi-annually, on or before the 20th of January and July. But any person first beginning a business or occupation must pay the fixed tax before engaging therein (Sec. 180). PERCENTAGE TAX . A contractor must pay a percentage tax of 3%, based on the gross monthly receipts realized during the period (Sec. 191), payable within twenty days after the end of each month (Sec. 183(a)). cdti In this connection, please be informed that the percentage tax is imposed both on the principal contractor and the sub-contractor of a single and the same construction work, the sub-contractor's tax liability being computed on the gross sum received by him/it from the principal contractor and the tax liability of the principal contractor being based on the total amount he/it received under the contract without deducting the amount paid to the sub-contractor. (P. J. Kiener Co. Ltd. vs. Antonio J. Araneta, as Collector of Internal Revenue, C.T.A. Case No. 102, decided on Nov. 2, 1959). INCOME TAX . Furthermore, a contractor is subject to the income tax, pursuant to the provisions of Chapter II, if individual, or Chapter III, if corporation, of Title II of the Tax Code, as amended. RESIDENCE TAX . Needless to say, the same contractor is, likewise, subject to the basic and additional residence taxes, pursuant to the provisions of the Residence Tax Law (Commonwealth Act No. 465), as amended. MUNICIPAL TAXES , LICENSE OR PERMIT . I regret to inform you that this Bureau has no jurisdiction in the enforcement and/or collection of municipal taxes, such taxes being purely municipal in character. cdll