BIR Ruling No. 038-83

March 16, 1983 BIR RULING NO. 038-83 Gentlemen : This refers to your letter dated December 2 and 13, 1982 requesting clarification as to whether the service fee which you will receive from a branch of a Japanese industrial concern its subject to the expanded withholding tax. It is represented that C. Itoh & Co., Ltd., Manila Branch is a corporation duly licensed by the Securities and Exchange Commission to do business in the Philippines; that it will render the following services and assistance to a branch of a Japanese industrial concern which will be licensed to do business in the Philippines by the Securities and Exchange Commission: (1) To make available to the party its market knowledge and experience in the Philippines to facilitate and bring about success in concluding the contract for certain project or projects; (2) To give the party pertinent information with respect to the execution of the project; (3) To give the party liaison services utilizing C. Itoh's communication facilities; (4) To render the party with C. Itoh's office facilities; and (5) To provide the party with services such as assisting in solving language difficulties travel and other problems of the Japanese technicians who might be assigned in the Philippines in connection with their project. In reply, please be informed that under the foregoing facts, you are a technical consultant of the Japanese Industrial concern: hence, the service fee paid to you are subject to the 3% withholding tax, in accordance with Section 1(b), in relation to Section 1(a)(5) of Revenue Regulations No. 13-78, as amended by Revenue Regulations No. 6-79, implementing Section 53(f) of the Tax Code, as amended by Presidential Decree No. 1351. Moreover, you are considered an independent contractor subject to the P100.00 annual fixed tax and to the 3% contractor's tax under Section 192(1) and 205(16) both of the Tax Code, as amended. Pursuant to Section 24(b)(2) of the same Code, as amended, you are also subject to the corporate income tax on your total net income derived in the preceding taxable year from all sources within the Philippines. Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner Bureau of Internal Revenue