Tax Exemption of Carpentry and Painting Works Performed by Individual Persons

August 27, 1992 BIR RULING NO. 233-92 50 000-00 233-92 Hanston Commercial & Industrial Corporation Hanston Building Emerald Avenue Ortigas Center, Pasig Attention: Ms . Cheryl Y . Cheng Gentlemen : This refers to your letter dated November 21, 1991 requesting for a ruling as to whether carpentry and painting works performed by individual persons are subject to 1% Expanded Withholding Tax, regardless of the amount paid. It is represented that Hanston Commercial and Industrial Corporation verbally contracts individual persons to perform painting and carpentry works for repair and maintenance or the improvement of its building; that the services of these individuals are leased without any written document; that they are not in any manner connected with certain companies nor are they registered as contractors; and finally that the repairs are usually minor and total payment do not exceed the amount of P20,000.00 per worker at year end. In reply, please be informed that under Revenue Regulations No. 6-85, otherwise known as the Consolidated Withholding Tax Regulations, specialty contractors subject to withholding have a specific meaning pursuant to R.A. 4566, to wit: "Article II APPLICATION OF THE ACT "Sec. 9. Definition of Terms . As used in this Act: xxx xxx xxx "A specialty contractor" is a person whose operations pertain to the performance of construction work requiring special skill and whose principal contracting business involves the use of specialized building trades or crafts." Specialty contractor is included under the category of "contractor" which is deemed synonymous with the term "builder" which refers to any person who undertakes or offers to undertake or purports to have the capacity to undertake or submits a bid to, or does himself or by or through others, construct, alter, repair, add to, subtract from, improve, move, wreck or demolish any building, highway, road, railroad, excavation or other structure, projects, development, or improvement, or to any part thereof, including the execution of scaffolding or other structures or works in connection therewith. (Sec. 9(b), R.A. 4566) It appears that to be in the class of specialty contractor, one must apply for contractors' license by written or oral examination, or both. (Sec. 19, Ibid ); thus, clearly, under those terms, individual painters or carpenters will not qualify as "specialty contractors". Instead, they shall be categorized as "casual labor" receiving compensation income whose tenure is occasional, incidental, or irregular; hence, exempt from withholding tax under Revenue Regulations No. 6-82 as amended by Revenue Regulations No. 12-86, otherwise known as the Withholding Tax Regulations on Compensation, to wit: "Sec. 3. Exceptions from Withholding . The following income payments are excepted from the requirement of withholding: xxx xxx xxx "(d) Remuneration for casual labor not in the course of employer's trade or business . The term "casual labor" includes labor which is occasional, incidental or irregular." Based on the foregoing, it is our opinion that individual painters or carpenters are not only exempt from the 1% expanded withholding tax under Revenue Regulations No. 6-85, regardless of the amount paid; but as casual laborers, they are also exempt from the Withholding Tax Regulations on Compensation under Revenue Regulations No. 6-82, as amended by Revenue Regulations No. 12-86. cdtech Very truly yours, JOSE U. ONG Commissioner of Internal Revenue