Basis of the 5% Expanded Withholding Tax on Gross Payments to Customs Brokers

October 16, 1990 BIR RULING NO. 198-90 50 (b) 000-00 198-90 Gentlemen : This refers to your letter dated February 26, 1990 in effect requesting a ruling on the basis of the 5% expanded withholding tax on gross payments to customs brokers. aisadc You cited BIR Ruling No. 489-88 which states that the 5% EWT on gross payments to customs brokers prescribed in Revenue Regulations No. 6-85 shall be based on all the advances and government charges such as arrastre, storage, stamps, demurrage and other miscellaneous government fees fully supported by official receipts as well as the gross handling and trucking charges and brokerage fees. You represented that your service company charges only Brokerage and Handling fees and the rest are all advances including Trucking charges; that in order to avoid delays in the processing of your bills to valued clients, you agreed in the meantime on the 5% expanded withholding tax deductions based on the gross billings including all advances covered with official receipts; that in your billings the advances are clearly specified and excluded from the service charges; and that for a small firm like yours, 5% deductions on all advances to your billings would count a lot. In reply, please be informed that pursuant to VAT Ruling No. 070-90 gross income payment for purpose of the expanded withholding tax shall have the same scope as the gross receipts of a customs broker as defined in Section 102 (a) (3) of the Tax Code, as amended, to wit: "Gross receipts means the total amount of money or its equivalent representing the contract price, compensation or service fee, including the amount charged for materials supplied with the services and deposits or advance payments actually or constructively received during the taxable quarter for the services performed for another person excluding the value-added tax." cdta Deposits or advance payments of the customs broker's compensation or service fee shall form part of the gross receipts for purposes of the VAT and the expanded withholding tax. However, advance payments by the customs broker for expenses such as arrastre, wharfage, form and waybills, magna scale, documentation fee, trucking and handling charges shall not form part of the broker's gross receipts if invoiced directly in the name of the broker's clients by the person performing such service and if the reimbursement to the broker is not invoiced with the broker's VAT invoice/official receipt. Advance payment for transportation, overtime and facilitation fee being expenses obviously incurred for the customs broker's benefit to facilitate the clearing of goods through customs, shall form part of the broker's gross receipts notwithstanding that the same is reimbursed by the client. Very truly yours, (SGD.) JOSE U. ONG Commissioner