Correct Treatment of a Commission Income on Work Already Completed

March 17, 1988 BIR RULING NO. 105-88 102 (a) 000-00 105-88 Gentlemen : This refers to your letter dated February 2, 1988 in behalf of your client McCann-Erickson (Phils.), Inc., requesting a ruling on the correct treatment of your client's commission income on work already completed but not yet billed as of December 31, 1987 for purposes of the value-added tax. cd It is represented that unbilled charges for work expected to have been completed by your client, such as, ads published or broadcast prior to December 31, 1987 based on Insertion Order or Broadcast/Telecast Order were accrued in the books of your client as of said date. It is contended that your client's advertiser still forms part of its gross receipts subject to the 4% contractor's tax and not to the 10% value-added tax. In reply, please be informed that pursuant to Section 6(g)(3) of Revenue Regulations No. 5-87 implementing Executive Order No. 273, amounts due on contract completed on or before December 31, 1987, payments of which are receivable on or after January 1, 1988, shall be considered as accrued as of December 31, 1987 for the purpose of the payment of contractor's tax subject to the following conditions: xxx xxx xxx "(ii) The contractor billed the unpaid amount not later than December 31, 1987, and copy of such billing is attached to the information return required in (i) hereof; xxx xxx xxx Since your client's commission income has not been billed on or before December 31, 1987, the above-stated condition has not been complied with and, therefore, the same is already subject to the 10% value-added tax pursuant to Section 102(a) of the Tax Code, as amended. cdt Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner