Determination of Annual Fixed Tax

December 27, 1979 BIR RULING NO. 134-79 Determination of annual fixed tax This refers to your letter dated December 1, 1979, stating that Philippine International Corporation, the corporate arm of PHILCITE is currently engaged in leasing of exhibition hall space for the holding of Trade Fairs and Exhibitions at the PHILCITE Bldg., Cultural Center of the Philippine Complex, Roxas Blvd., Manila; that out of the income realized from renting exhibit space to exhibitors, you remit 10% of this gross income to the Cultural Center of the Philippines, owner of the PHILCITE Building of which Philippine International Corporation, the corporate arm, is the lessee; that when you rent our space to exhibitors, you allow them to use free of charge whatever accessories such as lights, stands, booths, etc. which they may need and which you have on hand; that aside from the corporate income tax and residence taxes, you are currently paying the annual real estate dealer's tax; and that inasmuch as your articles of incorporation allows you to go into other purposes, you are considering the possibility of charging rental for the use of your accessories. cdt Under the foregoing facts, you request opinion on the tax consequences if you go into the above proposal, viz: 1. When a Fair/Exhibition is organized and launched, prospective exhibitors who wish to participate book for space and pay a rental fee. Since the income is rent for space similar to that of renting commercial stall spaces and not a contract for services, would the organizer/sponsor of the fair be subject to the 3% contractor's tax on the space rental income? 2. If you charge a separate rental fee for the use of your accessories and equipment, would the contractor's tax apply? In reply, I have the honor to inform you as follows: 1. All rental payments made by prospective exhibitors to the Philippine International Corporation for spaces form part of the annual income of that Corporation in determining the real estate dealer's annual fixed tax due therefrom in accordance with Section 192(3)(aa) of the Tax Code of 1977, as amended. The organizer/promoter of a fair/exhibition for merely promoting such fair or exhibition does not render any service; hence, he is not subject to the 3% contractor's tax on the space rental being paid by the exhibitors. 2. If the corporation charges rental fee for the use of its accessories and equipment (personal properties), then it shall be a lessor of personal property subject to the P100.00 annual fixed tax prescribed in Section 192(1) of the Tax Code of 1977, as amended, and the rental fee derived from such accessories and personal property shall be subject to the 3% tax prescribed in Section 205(17) of the same Code.