BIR Ruling No. 287-14

July 9, 2014 BIR RULING NO. 287-14 Section 2.57.2 (E) (3) (k) of RR No. 2-98, as amended Dent Chem Enterprise Company Blk. 3 Lot 12 & 14 Guijo St., Cabuyao Central Subd., Pulo, Cabuyao, Laguna 4025, Philippines Attention: Ms. Gloria M. Bautista President Gentlemen : This refers to your letter dated April 4, 2013 requesting for clarification whether or not the expanded withholding tax (EWT) on the labor recruitment/manpower services between DENT CHEM ENTERPRISE COMPANY (DCEC for brevity) and its clients should be based on the administrative fee only, or on the gross amounts payable to DCEC, which includes the basic salary and allowances plus the 13th Month Pay, and the SSS, Philhealth, HDMF and other allowances of the contracted workers under the contract. It is represented that DCEC is a corporation duly organized and existing under and by virtue of Philippine Laws and registered under tax identification number (TIN) 253-001-828. It is engaged in labor recruitment/manpower services. At present, DCEC client's deduction of EWT is based on gross billing which consists of overtime pay, holiday pay (if any), 13th Month Pay, and the SSS, Philhealth, HDMF and other allowances of the contracted workers under the contract. DCEC claims that certain items such as the employees' salary and mandatory contributions are income of the employees and not of the company and that this adversely affects their income as DCEC's sales is completely spent on salaries and transportation of their coordinators. In reply, please be informed that pursuant to Section 2.57.2 (E) (3) (k) of Revenue Regulations (RR) No. 2-98, as amended by RR No. 17-2003, DCEC's clients are required to deduct and withhold the 2% creditable tax on its income payments to it. The 2% withholding tax shall be based on the gross payments received by the business agencies which include the agency service fee, salaries, SSS, Philhealth and HDMF contributions net of VAT. SDTIaE 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 are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue