Tax Liabilities of a Commercial Broker, Manufacturer or Trader

December 11, 1989 BIR RULING NO. 243-89 21 (a); 102 (a) 000-00 243-89 Gentlemen : This refers to your letter dated January 25, 1989 stating your plan to put up a company whose activities shall be as follows: cdtech 1. Your principals from abroad will send you from time to time, designs of baskets paper mache and other related handicrafts. 2. That you then source for local maker to subcontract the making of said products. 3. That you are likely to advance either money or materials or both to the subcontractor. 4. That the finished products are then exported to your principal. 5. That for your remuneration you shall add to the export price 7 to 10%. You want to know whether you are to be classified as a commercial broker, manufacturer or trader and the attendant tax liabilities. In reply, please be informed that based on the above facts, you will bring proposed buyers and sellers together; you are a commercial broker as the term is defined under then Section 157(t) of the Tax Code. Accordingly, for rendering services to your principals abroad, you are subject to the 10% VAT based on the gross receipts derived by you. (Section 102(a), Tax Code, as amended by Executive Order No. 273). Likewise, your income derived from such services is subject to income tax, pursuant to Section 21(a) of the Tax Code, as amended. Finally, you should register your business name and books of accounts and other related accounting records with the Revenue District Office where your principal place of business is located. Very truly yours, (SGD.) JOSE U. ONG Commissioner