BIR Ruling No. 269-11

August 3, 2011 BIR RULING NO. 269-11 RR 2-98, as amended; RR 6-2001; BIR Ruling No. 086-99; BIR Ruling No. DA-242-04 Angelica 888 Express, Inc. #37 Elicano St. East Bajac-Bajac Olongapo City Attention: Ms. Theresa A. Guiriba Gentlemen : This refers to your letter dated September 14, 2010 requesting for a ruling that the sale of services by ANGELICA 888 EXPRESS, INC. to HHIC-PHIL., INC. is subject to two percent (2%) withholding tax. Documents submitted disclosed that ANGELICA 888 EXPRESS, INC. ("ANGELICA"), with Taxpayer Identification No. 007-198-044-000 is registered with the Securities and Exchange Commission (SEC) under SEC Registration No. CS200834127 dated December 16, 2010; that ANGELICA is primarily engaged in the maintenance and operation of transportation services for hire; that HHIC-PHIL., INC. is a domestic corporation and a Subic Bay Freeport locator with principal address at Green Beach 1, Redondo Peninsula, Sitio Agusuhin, Brgy. Cawag, Subic, Zambales; that ANGELICA has been contracted by HHIC-PHIL., INC. to provide shuttle service to transport Hanjin Shipyard workers on a regular and scheduled basis with a pre-determined route; that the transport units shall be operated by ANGELICA's drivers and which vehicles shall be well-maintained and equipped with all safety devices and equipments; that ANGELICA will provide the vehicle's diesel, payments for the drivers, dispatchers and other employees; and that based on trip reports, ANGELICA shall submit its billing to HHIC-PHIL., INC. every two (2) weeks, and the payments therefor shall be made every 14th and 29th of the month. In reply, please be informed that Section 2.57.2 (E) (4) (e) of Revenue Regulations No. 2-98 has been amended by Revenue Regulations No. 6-2001 which provides, viz. : "Section 2.57.2. Income payment subject to creditable withholding tax and rates prescribed thereon. Except as herein otherwise provided, there shall be withheld a creditable income tax at the rates herein specified for each class of payee from the following items of income payments to persons residing in the Philippines: xxx xxx xxx (E) Income payments to certain contractors On gross payments to the following contractors, whether individual or corporate Two percent (2%) HTcDEa xxx xxx xxx (4) Other contractors xxx xxx xxx (e) Transportation contractors which include common carriers for the carriage of goods and merchandise of whatever kind by land, air or water, where the gross payments by the payor to the same payee amounts to at least two thousand pesos (P2,000) per month, regardless of the number of shipments during the month." Thus, lessors of motor vehicles or transportation contractors are now subject to two percent (2%) creditable withholding tax pursuant to Revenue Regulations No. 2-98 as amended by Revenue Regulations No. 6-01. (BIR Ruling No. 086-99 dated July 1, 1999; BIR Ruling No. DA-242-04 dated May 7, 2004) IN VIEW OF THE FOREGOING, this Office is of the opinion that income payment to ANGELICA for shuttle services to HHIC-PHIL., INC. is subject to creditable withholding tax at the rate of two percent (2%) pursuant to Revenue Regulations No. 2-98 as amended by Revenue Regulations No. 6-01. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts as represented are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue