Remuneration is Subject to Withholding Tax

September 17, 1990 BIR RULING NO. 179-90 21 (b) 000-00 179-90 Gentlemen : This refers to your letter dated May 29, 1990, relative to the remuneration being paid by Philippine Airlines, Inc. (PAL) to its employees who are Filipino citizens but who are working for PAL outside the Philippines; and requesting a ruling whether said remuneration subject to withholding tax includes both wage payments within and without the Philippines. aisadc With respect to the withholding of tax on compensation of a citizen for services performed outside of the Philippines, Section 7 II(b)(1) of Revenue Regulations No. 6-82 provides that "if the compensation is paid by a resident employer, the basis of computation shall be the sum of the basic compensation and guaranteed payments stipulated in the contract of employment, whether totally or partially paid within or without the Philippines." On the other hand, Section 2(g) of Revenue Regulations No. 12-86 provides that "remuneration received by a citizen for services performed outside the Philippines for a domestic corporation . . . the payment of which is made in the Philippines, is subject to withholding tax under Section 7(II) of Revenue Regulations No. 6-82, as amended." It is your contention that said provisions are conflicting in the sense that while Revenue Regulations No. 6-82 states that the basis shall be the payments made within or without the Philippines, Revenue Regulations No. 12-86 states that the basis shall be only the payments made within the Philippines. In reply, please be informed that a study of the foregoing provisions of the regulations shows that there is no inconsistency between them. The aforesaid provisions of Section 2(g) of Revenue Regulations No. 12-86, enumerate the items of gross compensation for purposes of withholding tax and one of said items is that provided in paragraph (g) above-quoted i.e. payments made within the Philippines for services performed outside the Philippines. On the other hand, the above-quoted portion of Section 7.II of Revenue Regulations No. 6-82, in effect, states the payments made within or without the Philippines for said services form part of compensation for withholding purposes. In other words, the items of compensation subject to withholding tax enumerated in Section 2 of Revenue Regulations No. 12-86 are not exclusive. Accordingly, as provided in Revenue Regulations No. 6-82, payments made to Filipino citizens for services outside of the Philippines form part of the compensation for withholding tax purposes even if made without the Philippines. Very truly yours, (SGD.) JOSE U. ONG Commissioner