BIR Ruling No. 203-82

June 22, 1982 BIR RULING NO. 203-82 053-f 9-82 203-82 Lipercon Services Incorporated 2nd Floor, RTC Building 2296 Pasong Tamo, Makati Metro Manila Attention: Ms . Lolita C . Lim Personnel Manager Gentlemen : This refers to your letters dated February 5 and March 4, 1982 requesting a ruling as to whether payments to you for services you provide as a temporary service company to your clients are subject to the expanded withholding tax. cd It is represented that you are a temporary service company; that you provide your clients with temporary office, industrial workers and temporary employees for clerical positions like Secretary, Clerk-typist, General Clerk, Filing Clerk, Accounting Clerk and Bookkeeper; that your workers are paid by you fortnightly and their wages are subject to withholding tax on wages; that you bill your clients for total salaries paid to your temporary employees, which represent an average of 70% of the total amount billed; and that the balance of 30% covers your operating costs and service charge which represents your gross receipts. In reply, please be informed that pursuant to Revenue Regulations No. 13-78, as amended by Revenue Regulations No. 6-79, implementing Section 53(f) of the Tax Code, as amended by Presidential Decree No. 1351, only income payments to person enumerated therein are subject to withholding tax. Accordingly, and since service companies are not among those enumerated in said regulations, the payments made by your clients for the service you have rendered to them are not subject to the expanded withholding tax. However, since the said office workers you provide your clients are your employees, the wages received by them forms part of the remunerations for services rendered, subject to the withholding tax on wages prescribed by Section 21 in relation to Section 91 of the Tax Code, as amended by Batas Pambansa Blg. 135 and as amplified by Revenue Regulations No. 20-81 dated December 16, 1981. Moreover, under the foregoing facts, you are an independent contractor, subject to the P100.00 fixed annual tax pursuant to Section 192(1) of the Tax Code, as amended, and the gross money payments to you by your clients which include the total salaries paid to your temporary employees representing an average of 70% of the total amount billed, and the 30% covering your operating costs and service charge shall be subject to the 3% contractors tax under Section 205(16) of the Tax Code of 1977, as amended. cdtech Very truly yours, RUBEN B. ANCHETA Acting Commissioner