Taxability of the Industrial and Business Management Corporation

February 19, 1958 BIR RULING NO. 121-58 Industrial and Business Management Corporation 2nd Floor, Magsaysay Bldg. San Luis, Ermita, Manila Attention : Mr . Anselmo R . Villar Gentlemen: This is in reply to your letters, dated August 5 and September 26, 1957, requesting information as to the taxability of your client, the Industrial and Business Management Corporation, under its management contracts. cdpr The Articles of Incorporation of the Industrial and Business Management Corporation show that it is primarily engaged for the purpose of undertaking the general management and promotion for any person or other juridical entity of any industrial enterprise or business of any nature whatsoever. Under the sample contract of the corporation with the Philippine Cotton Development Corporation, its functions, as manager, consist substantially of the following: 1. (a) supervise the purchase of the necessary machinery and equipment; (b) supervise the selection of plantations to be purchased and/or leased; (c) supervise the purchase of seeds, plants and raw materials needed for the growing and/or processing of cotton and cotton by-products; (d) supervise the production and sales thereof as well as the preparation, processing and negotiation of applications for loans, licenses and tax exemption of the industry from the Department of Finance; (e) undertake, supervise market researches, gather statistics and data as well as surveys in connection and in relation with the business of the COMPANY. 2. (a) Employ, hire, contract or dismiss sub-executives, submanagers, statisticians, researchers, lawyers, analysts, steno-typists, technical personnel, purchasing agents, accountants, and such other minor employees and laborers; (b) determine and fix their remunerations, retainer and/or professional fees, all of which shall be chargeable to the COMPANY. 3. Manage, supervise, and direct all the operations of the COMPANY, with authority to borrow to meet the financial requirements of the COMPANY. For their services, supervision, and management, the industrial and Business Management Corporation is paid a yearly compensation equivalent to 10% of the net profits of the COMPANY before taxes. Under the facts stated above, the Industrial and Business Management Corporations is an independent contractor, being engaged in the business of selling their services and as such, it is subject to the fixed and percentage taxes prescribed in Section 182 and 191 of the Tax Code, as amended. prcd Very truly yours, (SGD.) JOSE ARAAS Commissioner of Internal Revenue