Basis of Withholding the 1% Expanded Withholding Tax

July 5, 1993 BIR RULING NO. 286-93 1% EWT, BASES OF 50 (b) 198-90 286-93 Philippine Duplicators, Inc. CCC Bldg., Edison Avenue Km. 15 South Superhighway Paraaque, Metro Manila Attention: Atty . Samuel F . Villacamos V . P . Finance and Administration This refers to your letter dated February 2, 1993 requesting for a ruling on what should be the basis of your customers in withholding the 1% expanded withholding tax: (a) Cost of Spare parts only? (b) Cost of Labor charge only? (c) Gross Invoice price? It is represented that your company is the exclusive distributor of Gestetner products (equipment, spare parts and supplies) in the Philippines; that as a marketing support, you maintain technicians who are tasked to service, repair and overhaul your customer's machines; that you charge your customer for labor in addition to the cost of spare parts that are fitted to the machine; and that on the sale of spare parts, you remit to the government the corresponding value-added tax. In reply, please be informed that Section (1) (e) (2) (1) of Revenue Regulations No. 6-85, as amended, implementing Section 50(b) of the Tax Code, as amended, provide viz: "1. . . . a) . . . b) . . . c) . . . "2. Other contractors (1) Persons engaged in the installation of elevators, central airconditioning units, computer machines and other equipment and machineries and the maintenance services thereon." In this connection, pursuant to VAT Ruling No. 070-90 gross income payment for purposes of the expanded withholding tax shall have the same scope as the gross receipts of a customs broker as defined in Section 102(a) (3) of the Tax Code, as amended, to wit: "Gross receipts means the total amount of money or its equivalent representing the contract price, compensation or service fee, including the amount charged for materials supplied with the services and deposits or advance payments actually or constructively received during the taxable quarter for the services performed for another person excluding the value-added tax (BIR Ruling No. 198-90)." Such being the case, this Office is of the opinion as it hereby holds that the basis for your customers in withholding the 1% creditable expanded withholding tax imposed under Section (1) (e) (2) (1) of Revenue Regulations No. 6-85, as amended, implementing Section 50(b) of the Tax Code shall be the gross receipts as above defined. cd LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue