Remunerations Paid to Employees by Instrumentalities of Foreign Governments Not Subject to Withholding Tax on Wages

June 10, 1981 BIR RULING NO. 095-81 090-a 000-00 095-81 Italian Trade Commission Citibank Center Building 8741 Paseo de Roxas Makati, Metro Manila Attention: Dr . Maurizio Ragnini Director-General Gentlemen : This refers to your letter dated March 16, 1981, requesting a ruling on whether or not the salaries of the local employees of the ITALIAN TRADE COMMISSION are subject to withholding tax on wages. It is represented that the Italian Trade Commission is an instrumentality of the Italian Government under the Ministry of Trade. In reply, please be informed that pursuant to Section 90(a)(4) of the National Internal Revenue Code of the Philippines, the term "wages" does not include remunerations paid for services by a citizen or resident of the Philippines for a foreign government or any international organization. Accordingly, since the Italian Trade Commission is an instrumentality of the Government of Italy, the remunerations paid by the said Commission to its employees in the Philippines are not subject to the withholding tax on wages. As regards the payments on certain contracts entered into by said Commission, it appears that the contracts cover rental for office space and janitorial services. The gross rental is subject to the withholding tax of 5% if it exceeds P500.00 per contract or payment whichever is greater. (Sec. 1(c), Revenue Regulations No. 13-78, as amended by Revenue Regulations No. 6-79). The income payments for janitorial services are subject to the withholding tax of 3% of 15% thereof. (Sec. 1(e)(1)(2)(f), Ibid .). Very truly yours, RUBEN B. ANCHETA Acting Commissioner