Revocation of General Circular No. V-334 dated April 12, 1961

February 8, 1971 REVENUE MEMORANDUM CIRCULAR NO. 04-71 SUBJECT : Revocation of General Circular No. V-334 dated April 12, 1961 TO : All Internal Revenue Officers and others concerned After a research and analysis of Section 24(b) of the National Internal Revenue Code, as amended by Republic Act No. 5431, and guided by the interpretation given by tax authorities to a similar provision in the Internal Revenue Code of the United States, on which the aforementioned provision of our Tax Code was patterned, this Office has come to the conclusion that the tax therein prescribed should be based on gross income without deduction whatever. Consequently, the ruling in General Circular No. V-334, dated April 12, 1961, allowing the deduction of the proportionate cost of production or exhibition of motion picture films from the rental income of nonresident foreign corporations, is erroneous for lack of legal basis. In view thereof, General Circular No. V-334, dated April 12, 1961, is hereby revoked and henceforth, local film distributors and exhibitors shall deduct and withhold 35% of the entire amount payable by them to non-resident foreign corporations, as film rental or royalty, or whatever such payment may be denominated, without any deduction whatever, pursuant to Section 24(b), and pay the withheld taxes in accordance with Section 54 of the Tax Code, as amended. All rulings inconsistent with this Circular are likewise revoked. All internal revenue officers are hereby enjoined to enforce the provisions of this circular. cdt MISAEL P. VERA Commissioner of Internal Revenue APPROVED: CESAR VIRATA Secretary of Finance