Who will Deduct the 1% Expanded Withholding Tax on the Freight Charges Payable to the Airlines

November 6, 1991 BIR RULING NO. 231-91 50 (b) 006-88 231-91 Gentlemen : This refers to your letter dated July 30, 1991 stating that you are a company engaged in air freight forwarding business; that you billed your clients on gross amount which includes freight charges, commissions, cartage, handling and other income; and that your clients deduct the 1% expanded withholding tax from the said gross amount although part of it are advances which you will eventually pay to the airlines. You now request a ruling whether your clients are required to deduct the expanded withholding tax on the freight charges paid by them to you but which you will eventually remit to the airlines. In reply, please be informed that pursuant to Section 1 (e) (2) (e) of Revenue Regulations No. 6-85 as amended by Revenue Regulations No. 13-86, otherwise known as the Revised and Consolidated Expanded Withholding Tax Regulations Implementing Section 50(b) of the Tax Code, gross payments to transportation contractors where the gross payment amounts to at least P2,000 per month, regardless of the number of shipments during the month, are subject to the expanded withholding tax of 1% beginning September 1, 1986. Hence, it is your company that should deduct and withhold the 1% expanded withholding tax when remitting to the airlines and freight charges amounting to at least P2,000 a month, regardless of the number of shipments during the month. Your clients are not required to deduct the expanded withholding tax on the freight charges payable to the airlines because under the expanded withholding tax law and regulations, gross payments to transportation contractors by their customers are not subject to the expanded withholding tax. (BIR Ruling No. 006-88 dated January 22, 1988). aisadc Very truly yours, (SGD.) JOSE U. ONG Commissioner