Tax Liability — Real Estate Brokerage Business

December 12, 1979 BIR RULING NO. 117-79 This refers to your letter dated May 16, 1979 informing this Office that you are a new corporation engaged principally in the real estate brokerage business and requesting clarification on the provisions of Revenue Regulations No. 13-78 implementing Presidential Decree No. 1351. Specifically, you would like to be clarified on the following: "1. Can the 5% withheld by the developer of commission payments to our corporation be proportionately accredited to our salesman as part of his 10% withholding? "2. In instances where a juridical person has a share in commissions received, do we have to apply another 5% retention in our payments to them or can the 5% retained from our corporation be accredited instead? cd "3. Can the 5% withholding be credited as part of the 6% percentage tax?" In reply, please be informed as follows: 1. Your first question is answered in the negative. The 5% withholding tax deducted and withheld by the developer from the income payments to your corporation representing your commission cannot be proportionately credited to your salesman as part of the latter's 10% withholding tax. The 5% withholding tax deducted and withheld by your developer is based on the income payments made to you as a real estate broker, pursuant to Section 1(b), in relation to Section 1(a)(1), of Revenue Regulations No. 13-78, as amended by Section 1(i) of Revenue Regulations No. 6-79. Said 5% withholding tax represents creditable income tax due from you. On the other hand, money payments to your salesmen are not subject to withholding tax, since said payments are not among those enumerated in Revenue Regulations Nos. 13-78 and 6-79. 2. It appears that income payments are made by you to another juridical person representing the latter's share in the commission received by you from the developer. Since these income payments were presumably made in connection with its business as real estate broker, they are also subject to the 5% withholding tax. A juridical person which is receiving income payment from you representing its share in the commission as a real estate broker, is also subject to the 5% withholding tax on said income payments. 3. The 5% withholding tax deducted and withheld from the income payments made to you by your developer constitutes creditable income tax due from you under Section 24 of the Tax Code of 1977, as amended, hence, the same cannot be credited against the 6% percentage tax due from you as real estate broker which is imposed by Section 208 of the same Code. casia