Clarification on the Conflicting Provisions of RR No. 6-85 and RAMO No. 1-87

November 15, 1988 BIR RULING NO. 544-88 50 (b) 443-88 544-88 Gentlemen : This refers to your letter dated June 23, 1988 stating that under Revenue Regulations No. 6-85 dated May 2, 1985, payments to advertising agencies, exclusive of amount paid or payable to media, is subject to one percent (1%) expanded withholding tax. However, Section 4, subsection (3) of Revenue Audit Memorandum Order No. 1-87 as published in the Philippines Revenue Journal in July, 1987 states that amounts paid or payable to media should be subject to withholding tax, otherwise said amounts would be disallowed as deductible expenses from taxable income. cdta Based on the foregoing representations, you now request clarification on the conflicting provisions of the aforesaid provisions of Revenue Regulations No. 6-85 and RAMO No. 1-87. In reply, please be informed that income payments to advertising agencies exclusive of the amount paid or payable to media are subject to the 1% expanded withholding tax under Section 1(e)(2)(h) of 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. In other words, portions of income payment to advertising agencies which portion shall, thereafter be paid or payable to media are not subject to the 1% expanded withholding tax. Moreover, this Office has consistently ruled that only the income payments to persons enumerated in Revenue Regulations No. 6-85 are subject to the expanded withholding tax. (BIR Ruling No. 271-88) Except talent fees, said payments for services specified in RAMO No. 1-87, are not among those specified in said regulations; hence, the same are not subject to the expanded withholding tax. (BIR Ruling No. 443-88) In the case of talent fees, income payments to recipients thereof are subject to the expanded withholding tax at the rate of 10% if paid to an individual or at the rate of 5% if paid to a taxable juridical person. The amount subject to withholding shall include not only fees, but also per diems, allowances and any other form of income payments. In the case of professional entertainers, athletes, and all recipients of talent fees, the amount subject to withholding tax shall also include amounts paid to them in consideration for the use of their names or for public appearances for purposes of advertisements or sales promotion. [Sec. 1(a)(8) and (b), Revenue Regulations No. 6-85] Finally, since the advertising agency appears as payor of the talent fees, said agency shall undertake the deduction and withholding of the expanded withholding tax hereinabove specified before making payments to the recipients thereof. cdti Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner