BIR Ruling No. 158-82

April 28, 1982 BIR RULING NO. 158-82 90-0 000-00 158-82 A and A Continental Commodities Philippines, Inc. 1906-1908 Pacific Bank Bldg. 6776 Ayala Avenue Makati, Metro Manila Attention: Mrs . Shirley Y . Bangayan Executive Vice-President Gentlemen : This refers to your letter dated March 26, 1981, requesting a ruling as to whether the commissions and the monthly allowances you pay to your account executives are subject to the withholding tax. It is represented that your company is in the commodity trading business wherein you act as brokers for your clients; that the nature of your business is in some way similar to that of a stockbroker; that you engaged the services of account executives who act as your authorized representatives to solicit business for you on a contractual basis; that you pay these account executives a fixed monthly allowance of P800.00 to cover up transportation and other promotional expenses said account executives incur on your behalf; and that said account executives are also entitled to commissions in accordance with the rates provided for in your working contract with them. In reply, I have the honor to inform you that the commissions you give to your account executives are wages since they are paid as compensation for services performed by the employee for this employer and therefore they are subject to the provisions of the withholding tax on wages under Chapter XI Title II of the Tax Code of 1977, as implemented by Revenue Regulations No. V-8 as amended. With regard to your query as to whether you are required to withhold a percentage of their monthly allowance please be informed that amount paid specifically either as advance or reimbursement for travelling or other bona fide ordinary and necessary expenses incurred or reasonably expected to be incurred in the business of the employer are not wages and are not subject to withholding tax. (Sec. 2(c) RR-V-8). Very truly yours, RUBEN B. ANCHETA Acting Commissioner