35% Withholding Tax-Services of Atlanta Consult

August 21, 1981 BIR RULING NO. 159-81 24-b-1 000-00 159-81 Mr. Dakila B. Fonacier Assistant Secretary Ministry of Natural Resources Diliman, Quezon City S i r : This refers to your letter dated February 28, 1981 requesting a ruling as to whether or not the payments to be made by the Ministry of Natural Resources to Atlanta Industrie-and Unternehmensberatung GMBU (Atlanta Consult) of West Germany for its services in connection with the Smallholder Tree-farming and other Forestry Projects of the Ministry of Natural Resources is subject to the 35% withholding tax prescribed in Section 53(b) (2) of the Tax Code. It is represented that the Ministry of Natural Resources and Atlanta Consult executed a Consultants' Services Contract which was duly approved by the President on October 31, 1979 whereby Atlanta Consult shall undertake for that Ministry, Wood Industry Development Study Project, a sub-component of IBRD Loan No. 1506 or otherwise known as the Smallholder Treefarming and other Forestry Projects. In reply thereto, I have the honor to inform you that the payments for the services of Atlanta Consult under the aforementioned Consultants' Services Contract are considered royalties, since the said payments are being made in consideration of technical advice, assistance or services rendered in connection with technical management or administration of any scientific, industrial or commercial undertaking, venture, project or scheme. (Section 37(a)(4)(F), Tax Code) Accordingly, said payments are subject to the 35% withholding tax under Section 24(b)(1) in relation to Section 53(b)(2) of the Tax Code. However, said payments are not subject to the 3% contractor's tax prescribed by Section 205 of the Tax Code. aisadc Very truly yours, RUBEN B. ANCHETA Acting Commissioner