Amounts Paid to Directors of a Corporation are Not Subject to the Expanded Withholding Tax

August 3, 1987 BIR RULING NO. 229-87 51-f 000-00 229-87 Gentlemen : This refers to your letter dated October 10, 1986 requesting confirmation of your opinion to the effect that the director's fees paid to your client, Chemical Industries of the Philippines (Chemphil) are not subject to the expanded withholding tax or to the withholding tax on compensation income. It is represented that Chemphil owns shares of stock in a domestic corporation on account of which it has designated one of its officers to sit as a director in the said corporation and to act in behalf of its interest in all of the board's and stockholder's meetings; that Chemphil has given instructions to the domestic corporation that all director's fees, including per diems, bonuses and allowances that may be payable to the designated director shall be paid directly to Chemphil; and that Chemphil records such payments as income. In reply thereto, I have the honor to inform you that your opinion is hereby confirmed. Pursuant to Revenue Regulations No. 6-85 implementing Section 51 (f) of the Tax Code, otherwise known as the Revised and Consolidated Expanded Withholding Tax Regulations, payments only to persons enumerated therein are subject to the expanded withholding tax. Considering that amounts paid to directors of corporation are not among those specified in said Regulations, such payments are not, therefore, subject to the expanded withholding tax. Moreover, the director's fees per diems, bonuses and allowances shall not be subject to the withholding tax on compensation income under Revenue Regulations No. 6-82 considering that the director's fees were not received by the director in his own behalf but are in fact intended for and received by Chemphil. However, since the aforesaid payments are not subject to withholding, the payor shall render an information return on such payments pursuant to Section 71 of the Tax Code, as amended by Batas Pambansa Blg. 135 and as implemented by Section 21 of Revenue Regulations No. 1-82 dated March 18, 1982. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner