BIR Ruling [UN-222-94]

July 26, 1994 BIR RULING [UN-222-94] Business Workshop, Inc. 17 Dexter Road Toro Hills, Quezon City Attention: Mr . Simplicio T . Quiambao General Manager Gentlemen : This refers to your letter requesting for opinion on what should constitute your gross payments, which for purposes of the expanded withholding tax shall be the basis of the 1% creditable income tax. It is represented that you are a marketing service agency and that one of services that you render to you client-firms is to provide them with field interviewers, at mutually agreed rates, to work on your clients' projects; that you are being paid an agency service fee but you billing invoice to you client-firms is made up of the following items per field interviewer, viz: cdtech Basic wage P121.00 Agency service fee (@ 17.65% X P121.00) 21.36 Add: Incidentals 13th-month pay 10.08 Social Security 5.76 Medicare 1.42 Employee Compensation 0.45 SUB-TOTAL P160.07 VAT (10%) 16.01 TOTAL BILLING P176.08 ========= that you pay your workers the basic wage, including 13th-month pay, SSS contributions, Medicare and Employee Compensation, but in turn, you client-firms reimburse you for these payments. You now request whether the 1% creditable income tax being withheld by your client-firms should be based on agency service fee alone of P21.36 or on the above sub-total amount of P160.07. In reply, please be informed that for purposes of the Expanded Creditable Withholding Tax, the basis of the 1% tax shall be the "gross payments" to the contractors, whether individual or corporate, pursuant to Sec. 1(e), Rev. Regs. No. 6-85, as amended by Rev. Regs. No. 8-90. Accordingly, the basis for the questioned 1% creditable withholding tax in your case should be the total billing of P160.07, considering that you are being reimbursed by your clients of your other incidental expenses, such as the 13th-month pay, SSS, Medicare and Employee Compensation; hence, all form part and parcel of your "gross payments," (BIR Ruling No. 187-93 dated May 5, 1993) cdt Very truly yours, ALICIA P. CLEMENO Acting Assistant Commissioner Legal Service