National Power Corp. Cannot Assume Payment of Contractor's Tax Liability

October 22, 1985 BIR RULING NO. 186-85 205-00 000-00 186-85 Gentlemen : This refers to your letter dated May 26, 1983 requesting in effect exemption from the payment of contractor's tax on the receipts to be derived by you from the National Power Corporation (NPC) in connection with your contract for the construction of the Civil Works for Agus IV Hydroelectric Project in Lanao del Norte, whereby the NPC assumed the obligation for "the payment of all duties as well as the 3% contractor's tax which are or may become payable either currently or prospectively". In reply, please be informed that after a re-study of Section 13, R.A. 6395, as amended by P.D. No. 938, this Office is of the opinion, and so holds, that the scope of the tax exemption privilege enjoyed by NPC under said section covers only taxes for which it is directly liable and not on taxes which are only shifted to it. (Phil. Acetylene vs. C.I.R., et al., C.R. No. L-19707, August 17, 1967) Since contractor's tax is directly payable by the contractor, not by NPC, your request for exemption, based on the stipulation in the aforesaid contract that NPC shall assume payment of your contractor's tax liability, cannot be granted for lack of legal basis. Accordingly, B.I.R. Ruling No. 076-83 is hereby revoked. Very truly yours, (SGD.) TOMAS C. TOLEDO Acting Commissioner