Rate of Tax Applicable on Gross Receipts Derived by Business Agent from Clients

November 8, 1985 BIR RULING NO. 200-85 205-53-f 000-00 200-85 Gentlemen : This refers to your letter dated August 8, 1985 stating that you are a full service advertising agency that handles and performs a wide range of advertising and sales promotional activities for and on behalf of your varied group of clients; and that you also perform for your clients' varied spectrum of business and trade industries such services which include a) design and drawing of a plan, called a "campaign" to promote a client's product, services, and/or corporate reputation; b) in line with the preparation and production of ad materials for print (newspapers and magazines, posters, etc.) publication or release; c) production of commercials for radio, television or cinema; d) supervision of promotional events and other activities a client may request or require you to attend on its behalf such as raffle draws, fashion shows, games, contests, etc.; and e) design and production of slide tape presentation, collaterals such as brochures, calendars, mailers, sales kit, leaflets and mailers; that your income is derived mainly from the reimbursement of the costs of manpower and resources that you tap from within your organization, e.g., your artists writers and production personnel; and partly, from, the outcome of the advertising/sales promotional plan/campaign. cdti Based on the foregoing representation, you now request information as to the correct rate of tax applicable on the gross receipts which you derived from your various clients. In reply, please be informed that under the foregoing facts, you are an advertising agency; hence, you are considered a business agent [Sec. 187(v), Tax Code] subject to the fixed annual tax of P100.00 imposed by Section 192(1) of the Tax Code and to the 4% contractor's tax imposed by Section 205 of the same Code, as amended on the gross receipts derived from your advertising contracts with your various clients, consisting of payments to you for the cost of manpower and resources that you tap from within your organization, e.g., your artists, writers and production personnel and incentive/bonus, payment of which depends on the outcome of your advertising sales promotional plan/campaign. Moreover, for income tax purposes, said income payments shall be subject to the 1% expanded withholding tax under Section 1(e)(2)(h) of Revenue Regulations No. 6-85, otherwise known as the Revised and Consolidated Expanded Withholding Tax Regulations implementing Section 53(f) of the Code, as amended. cd Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner