Taxability of a Filipino Company Recruiting Technicians in the Philippines for Employment in Vietnam

October 28, 1966 BIR RULING NO. 051-66 Mr. Manuel Miranda Certified Public Accountant c/o Macondray & Co., Inc. P.O. Box 768, Manila S i r : This refers to your letter dated October 21, 1966 requesting information on the following: cdtech "1. A Filipino company deals in the recruitment of Filipino labor for an American contractor in Vietnam. Subject company has a contract with the American contractor whereby the former bills the latter a monthly rate per technician recruited. In turn, the partnership pays the technician a monthly compensation lower than that billed the contractor in the form of: a) A monthly overseas allowance payable at Saigon b) A monthly family allowance payable to the technician's family in the Philippines c) Free board and lodging by the technician while in Saigon. Monthly billings are remitted by the American contractor to the partnership's Manila office. "2. The partnership under case No. 1 has a construction contract with the U.S. Government in Vietnam. Is the company subject to the contractor's tax in the Philippines? If so, what will be the basis of the tax? In reply, I have the honor to inform you that under the foregoing representations, the Filipino company for recruiting technicians in the Philippines for employment in Vietnam, retaining for itself the differential between the actual amount paid to the technician and the amount received from the American contractor, is constituted a business agent as the term is defined in Section 194(v) of the Tax Code and, therefore, subject to the annual fixed tax of P75.00 imposed in Section 182(A)(3)(w) of the Tax Code and to the 3% tax prescribed in Section 191 of the same Code. The company, for undertaking a construction work in Vietnam is exempt from the payment of the 3% contractor's tax provided that the construction job will be performed in its entirety in Vietnam. (See BIR Ruling No. 1, s. 1965) Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue