Withholding of 1% Expanded Withholding Tax on Gross Payments to PAL

August 25, 1988 BIR RULING NO. 411-88 50-b 395-88 411-88 Gentlemen : This refers to your letter dated August 15, 1988 requesting a ruling as to whether the Philippine Airlines is exempt from the provisions of the expanded withholding tax as a government-owned or controlled corporation. It is represented that your client, Monark Equipment Corporation tried to withhold one percent (1%) of the amount they are supposed to pay Philippine Airlines for transporting their goods, but the latter refused to accept the shipment unless full payment is made, claiming that it is exempt from the provisions of the expanded withholding tax. In reply, please be informed that gross payments to the Philippine Airlines (PAL) are subject to the expanded withholding tax, since said withholding tax is creditable income tax and PAL under its charter, P.D. No. 1590, is subject to the corporate income tax or to the franchise tax, whichever is lower. Such being the case, your client should withhold 1% expanded withholding tax on its gross payments to PAL beginning September 1, 1986 where such gross payments amount to at least P2,000.00 per month, regardless of the number of shipments during the month pursuant to Section 1(a) (2)(e) of Revenue Regulations Nos. 8-85 and 13-86, otherwise known as the Revised and Consolidated Expanded Withholding Tax Regulations implementing Section 50(b) of the Tax Code, as amended. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner