Exemption of Commission Fee from Expanded Withholding Tax

May 29, 1990 BIR RULING NO. 109-90 21 (a) 50 (b) 015-83 109-90 Gentlemen : This refers to your letter dated March 19, 1990 stating that one of your clients is engaged in business as a real estate dealer; that in the course of its selling activity it was able to sell a property through the referral of another corporation whose business is computer services; that for such referral, the latter corporation received a commission fee. aisadc Based on the foregoing, you now request for an opinion whether the commission fee for mere referral is subject to the expanded withholding tax. In reply, please be informed that under Revenue Regulations No. 6-85, as amended, otherwise known as the Revised and Consolidated Expanded Withholding Tax Regulations implementing Section 50(b) of the Tax Code, only payments to persons enumerated therein are subject to withholding tax. Although certain brokers are included in the enumeration of persons covered by said regulations, mere referral to a broker by one who is not habitually engaged as such does not make the latter a broker; hence, commission fee received by them is not subject to the expanded withholding tax. However, said commission fee shall be subject to income tax under Section 24(a) of the Tax Code. Very truly yours, (SGD.) JOSE U. ONG Commissioner