GOCC Required to Withhold the Corresponding Taxes from Its Money Payments to Private Individuals and Corporations

October 17, 1992 BIR RULING NO. 281-92 19, 24 000-00 281-92 The Regional Director Revenue Region No. 10-B Butuan City M a d a m : This refers to your letter dated May 21, 1991 requesting for a legal opinion on whether or not the Paper Industries Corporation of the Philippines (PICOP) is a government-owned or controlled corporation within the contemplation of Republic Act 1051 and therefore, should be required to withhold taxes from its money payments to private individuals, corporations, partnerships and/or associations. LexLib It is represented that the Paper Industries Corporation of the Philippines (PICOP) was created under and by virtue of the Corporation Code of the Philippines; that the government of the Philippines holds about 82% of the capital stock (equity) of PICOP when the company's loans from the Government were converted into equity; that on January 30, 1991, the BIR in Revenue Region 10-B issued a pre-assessment notice to PICOP regarding the latter's money payments to contractors, hotels for room occupancy, common carriers, and for rentals, altogether amounting to P5,459,269.34, inclusive of interest, penalties, and surcharges; that said assessments were based on the belief that PICOP is a government-owned and controlled corporation and is therefore subject to the provisions of R.A. 1051; and finally, that PICOP maintains the position that it does not fall within the purview of R.A. 1051 because it is not a government-owned or controlled corporation. In reply, please be informed that gleaned from the definition of a government-owned or controlled corporation, in Section 2 (13) of the Administrative Code of 1987 stating "Any agency organized as a stock or non-stock corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly, or where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital stock: Provided, That government-owned or controlled corporations may be further categorized by the Department of Budget, The Civil Service Commission, and the Commission on Audit for purposes of the exercise and discharge of their respective powers, functions and responsibilities with respect to such corporations." (emphasis supplied) PICOP is a government-owned and controlled corporation by virtue of the fact that the government holds and controls 51% of its capital stock. Thus, pursuant to R.A. 1051, PICOP is required to withhold the corresponding taxes from its money payments to private individuals, corporations, partnerships and/or associations. Very truly yours, JOSE U. ONG Commissioner of Internal Revenue