Request of the Philippine Centennial Commission to Waive Payment of 20% Withholding Taxes on Cash Prizes

May 8, 1998 BIR RULING NO. 053-98 27 (D) (1)-000-00-053-98 Presidential Management Staff Malacaang Attention: USEC . Demetrio L . Ignacio , Jr . Social Policy Office Gentlemen : This refers to your faxed message dated April 29, 1998 requesting our comment/recommendation relative to the request of the Philippine Centennial Commission to waive the payment of the 20% withholding taxes on cash prizes amounting to more than P10,000.00. prcd It appears that the Philippine Centennial Commission, through the Cultural Center of the Philippines and other national agencies, will hold a competition which will encourage the private and government sectors to decorate their buildings and premises in connection with the celebration of the 100th year of independence from Spain; that the Centennial Decor Competition is a Manila-wide competition to select the best centennial decoration among entries for government buildings in Metro Manila; and that the winners will receive the following prizes: First Prize P200,000.00 plus Presidential plaque Second Prize P100,000.00 plus Presidential plaque Third Prize P50,000.00 plus Presidential plaque In reply, please be informed that prizes to individuals would be subject to the 20% final tax for passive incomes but prizes (irrespective of the amount) is not one of the passive incomes of a corporation subject to the 20% final tax under Section 27(D)(1) of the Tax Code of 1997. However, prizes to be awarded to private corporations, government-owned or controlled corporations, agencies or instrumentalities which will be declared winners in the Centennial decor competition shall be subject to the 34% corporate income tax under Section 27(A) of the same Code. This will, therefore, serve as authority for the Philippine Centennial Commission/Cultural Center of the Philippines to forego the withholding of the 20% final tax on the cash prizes of the cash prized of the three (3) winners in the said Centennial decor competition among government buildings in Manila. However, if the winner is an individual, this would be subject to your withholding the 20% final tax on passive income. cdlex Very truly yours, (SGD.) LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue