Adherence to the Withholding Provisions of RA No. 1051

February 27, 1958 BIR RULING NO. 142-58 The Philippine AirLines, Inc. M.R.S. Building Plaza Cervantes, Manila Gentlemen : Reference is made to your letter of the 11th instant, requesting information as to whether or not, under the following circumstances, this Office would still adhere to the withholding provisions of Republic Act No. 1051, in relation to Revenue Regulations No. V-40. cdt "This has reference to our General Sales Agency Agreements entered into between the Philippine Air Lines, Inc. and several foreign airlines such as Scandinavian Airlines System Air India International, Air France, KLM (Royal Dutch Airlines), Japan Air Lines and Civil Air Transport operating in the Philippines. As per these agreements, PAL has to take care of all matters pertaining to their operations in the Philippines including taxation. "In this connection, we prepare the sales reports and pay on or before the due date their 2% Common Carrier's Tax based on their total sales of tickets monthly both on cash and charge basis. Out of these sales, are tickets issued to Government officials and employees chargeable to their corresponding offices concerned. The bills are being sent to these government offices for collection and sometimes it will take three months or more before payments are made either to the PAL or to the travel agencies. These government offices, upon payment of their obligations, insist on withholding the 2% Common Carriers Tax, based on the total value of tickets issued to them on credit in accordance with your rules and regulations regarding withholding of taxes. The value of these tickets in question are included in our sales reports made monthly for each of our principals in the computations of the 2% Common Carriers Tax due from each of them and on which the said Common Carriers Tax is paid by us to the City Treasurer of Manila monthly. We believe that the above procedure is advantageous to the Government as the tax on tickets sold on charge basis is being paid to the Government in advance prior to their collections from the government offices. On the other hand should we follow your procedure, your representatives will have a hard time in checking our records for purposes of determining the correct amount of Common Carriers Tax due monthly from each airline concerned. They will have to check several months in advance to find out whether the tax was withheld or not by the government offices to which the tickets were issued." In answer thereto, I have the honor to inform you that, pursuant to the proviso to Section 1 of Republic Act No. 1051, "the deductions and withholdings referred to herein shall not be required in case previous payments of the aforesaid tax liability or liabilities had already been made by the corresponding payee". The reason for the proviso is obvious nothing can be deducted and withheld after the tax due had already been paid." Accordingly, and if it is true that, as can be gathered from your said letter, the 2% common carrier's tax due on the passage fares of government officials and employees is being paid by you even before collection thereof (fares) from the government offices concerned is effected, no further tax need be deducted and withheld by said offices from money payments made to you, or to travel agencies, on account of the passage fares due to your principals. LLjur Very truly yours, (SGD.) JOSE ARAAS Commissioner of Internal Revenue