BIR Ruling [UN-032-95]

January 16, 1995 BIR RULING [UN-032-95] Mr. Rex R. Rosas & Ms. Judy T. Rosas 2173 Vision St., Sta. Cruz Manila Dear Mr. and Mrs. Rosas : This refers to your letter dated June 1, 1994 stating the both of you are the recipients of scholarship granted by the Far Eastern Division of the General Conference Corporation of Seventh-day Adventists based in Singapore since June 1991 up to the present while pursuing your degrees at the University of the East; that the amount of scholarship granted to both of you are coursed through your employer, Central Philippine Adventist College (CPAC), situated in Murcia, Negros Occidental, for recording purposes and control; that the monthly stipends that both of you are receiving are being paid by the said Far Eastern Division in Singapore which is enough for your education and living expenses; that besides the scholarship amount, you have not been receiving any other compensation from CPAC or from any together source; and that CPAC had been inadvertently withholding income taxes from such scholarship. cdtech Based on the foregoing, you now request for a ruling as to whether or not your scholarship grants received from Far Eastern Division based in Singapore are subject to withholding tax. In reply, please be informed that the scholarship grants which both of you are receiving from Far Eastern Division of the General Conference Corporation of Seventh-day Adventist in Singapore and coursed through your employer, the Central Philippine Adventist College, are not considered as compensation for services performed by an employee for his/her employer, considering that an employer-employee relationship between both of you individually and the Far Eastern Division does not exist. The said scholarship grants being received by both of you are not therefore, subject to the withholding tax on wages prescribed under Section 72 of the Tax Code, as amended, which requires as a condition for its imposition the existence of an employer-employee relationship between the income payor and the recipient of such income. Moreover, you are not subject to the creditable withholding tax imposed under Revenue Regulations No. 6-85, as amended, otherwise known as the Revised and Consolidated Expanded Withholding Tax Regulations, implementing Section 50(b) of the Tax Code, as amended, considering that under the said Revenue Regulations, only payments to persons enumerated therein are subject to the expanded withholding tax. Since scholarship grant is not among those specified in the said Regulations, the same is not, therefore, subject to expanded withholding tax. (BIR Ruling No. 131-91 dated July 8, 1991) Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)