Request for a Different System of Withholding

October 12, 1995 BIR RULING NO. 156-95 50 (a) 000-00 156-95 Pambansang Sanggunian sa Laang-Bisig at Kabataan [National Manpower and Youth Council (NMYC)] NMYC Complex, South Expressway Taguig, Metro Manila Attention: Mr . Jose D . Lacson Director General Gentlemen : This refers to your letter dated February 27, 1995, stating that the NMYC/TESDA is presently implementing the second Vocational Training Project (VTP II) financed by IDA Credit 2392 PH; that in its payment schedule, there are cost categories which are 100% withdrawable from your loan proceeds from the World Bank; such as consultancy and staff development services; that in paying your creditors for these services, you are required under our regulations to withhold certain percentage of tax like the withholding tax and the creditable withholding of VAT which are remitted and made payable to the BIR; that said withholding taxes are not reimbursed by the World Bank but are shouldered by the Philippine government. A sample disbursement voucher, shows the manner of payment to the contractors, as follows: cdta "To payment of training expenses incurred during the conduct of Object Relational Database Management Training program held last November 23 December 21, 1994 at the Globstan Training and Test Center at P79,062.50/tax for 8 participants P632,500 "Less 5% withholding tax P31,325 P600,875" ======== Inasmuch as these types of taxes were not identified and appropriated in the Project Financing Plan, you now request for an authority to adopt a different system of withholding to make your disbursement documents eligible to 100% financing from the World Bank, it appearing that in the sample voucher, the amount of P31,625.00 representing the 5% withholding tax is excluded from payment by the World Bank. In reply, please be informed that your request for a different system of withholding so as to include the above amount of P31,625.00 shown in the above sample voucher for 100% financing by the World Bank, cannot be granted for lack of legal basis. Pursuant to Revenue Regulations No. 6-85 and Revenue Regulations No. 10-93, income payments by the government or any of its instrumentalities such as the NMYC to its contractors are subject to 5% creditable income tax and 6% creditable VAT withholding, respectively. It is our opinion that to allow a mode of withholding for NMYC, different from that prescribed for other government agencies will unduly violate the guarantee of uniformity in the application of tax laws and regulations. cdti Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue