3% Franchise Tax on PLDT Billings

April 17, 1990 BIR RULING NO. 057-90 117 (b) 000-00 057-90 Gentlemen : This refers to your letter dated September 6, 1989 requesting a ruling as to whether you should continue or desist from collecting the 3% franchise tax on PLDT billings for telephone services rendered to you. It is represented that you are wholly-owned by the National Development Company (NDC), a government-owned or controlled corporation; that you have withheld and remitted to this Office the 3% franchise tax on PLDT's telephone service billing beginning February 16 to August 15, 1989 in the amount of P1,566.21; and that as a consequence, PLDT has cut your telephone line and is demanding from you the immediate payment of the aforesaid franchise tax which you remitted to this Office. In reply, please be informed that pursuant to Revenue Regulations No. 4-88, implementing Republic Act No. 1051, bureaus, offices and instrumentalities of the government, including government-owned or controlled corporations, as well as their subsidiaries, among others, are required to deduct and withhold the taxes due from private individuals, corporations, partnerships and/or association before making any money payment to said payees. One of the taxes subject to deduction and withholding is the franchise tax due from franchise grantees on their gross receipts from the business covered by their franchise. PLDT being a franchise tax imposed under Section 117 of the Tax Code, as amended. Such being the case, since you are wholly-owned by NDC and, therefore, a subsidiary of NDC, a government-owned or controlled corporation, you are required to deduct and withhold the 3% franchise tax due on your money payments to the PLDT for telephone services rendered to you in accordance with the provision of Republic Act No. 1051, as implemented by Revenue Regulations No. 4-88. In other words, you should continue collecting the 3% franchise tax on PLDT billings. In this connection, your attention is invited to Section 8 of Revenue Regulations No. 4-88, implementing Section 271 of the Tax Code, which prescribes the penalty for violation of the withholding tax laws and implementing regulations. casia Very truly yours, (SGD.) JOSE U. ONG Commissioner