Whether Consumer Thrust Marketing Services is Subject to 1% or 5% Expanded Withholding Tax pursuant to Revenue Regulations No. 6-85

December 17, 1992 BIR RULING NO. 361-92 50 (b) 544-88 361-92 Consumer Thrust Marketing Services 155 Iriga Street, La Loma Quezon City Attention: Bernadette Lee Pardo General Manager Gentlemen : This refers to your letter dated July 20, 1992 asking for clarification as to whether your company is subject to 1% or 5% expanded withholding tax pursuant to Revenue Regulations No. 6-85. It is represented that your company is engaged in the business of contracting marketing services, re: direct consumer product advertising and merchandising; that your main clientele are manufacturers and distributors of consumer products; that you bill your clients on the agreed salary rates of personnel and all the miscellaneous expenses incurred necessary in the accomplishment of the project; that you earn by charging your client, Agency Service Fee of 17.65 % of the total billable cost of the project which is the standard rate in the industry; that all your clients, such as McDonald's, Pepsi Cola Philippines, Bonheur Marketing Corporation , etc., with the exception of 3M Philippines, classified you as an advertising agency and correspondingly withheld 1% expanded withholding tax based on your gross income, that is the 17.65% Agency Service Fee of the total billable cost of the project pursuant to Section 1 (e) (2) (h) of the Revenue Regulations No. 6-85; that on the other hand, 3M Philippines treated their payment to your company as professional fee and talent fee paid to taxable juridical person and consequently withheld 5% expanded withholding tax pursuant to Section 1 (b) of the Revenue Regulations No. 6-85, hence this request. In reply, please be informed that income payments to advertising agencies exclusive of the amount paid or payable to media are subject to 1% expanded withholding tax under Section 1 (e) (2) (h) of the Revenue Regulations No. 6-85 otherwise known as the Revised and Consolidated Expanded Withholding Tax Regulations implementing Section 50 (b) of the Tax Code, as amended. Such being the case, your company is subject to 1% expanded withholding tax based on your gross income exclusive of the amount paid or payable to media. cdti Very truly yours, JOSE U. ONG Commissioner of Internal Revenue