Publishing Revenue Regulations No. 13-78 dated September 7, 1978, as amended by Revenue Regulations No. 6-79 dated June 4, 1979

June 25, 1979 REVENUE MEMORANDUM CIRCULAR NO. 51-79 SUBJECT : Publishing Revenue Regulations No. 13-78 dated September 7, 1978, as amended by Revenue Regulations No. 6-79 dated June 4, 1979 TO : All Internal Revenue Officers and others concerned For the information and guidance of all concerned, there is published hereunder the full text of Revenue Regulations No. 13-78, dated September 7, 1978, with the amendments introduced by Revenue Regulations No. 6-79 dated June 4, 1979 integrated therein in capital letters and those deleted bracketed. "TO : All Internal Revenue Officers and others concerned Pursuant to the provisions of Presidential Decree No. 1351 and in accordance with Section 4 in relation to Section 326 of the National Internal Revenue Code of 1977, as amended, these Regulations are hereby promulgated to implement the withholding of creditable income taxes from certain income payments and the additional requirement for deductibility of such income payments which are otherwise deductible from the gross income of the payor. "SECTION 1. Income payments subject to withholding tax and rates prescribed therein . Except as herein otherwise provided, there shall be withheld a creditable income tax at the rates herein specified for each class of payee from the following items of income payments to persons residing in the Philippines: (a) Professional fees, talent fees, etc. paid to individuals . On the gross professional, promotional and talent fees paid to the following individuals: (1) Those individually engaged in the practice of professions or CALLING: lawyers, certified public accountants; [medical practitioners] DOCTORS OF MEDICINE; architects; civil, electrical, chemical, mechanical, structural, industrial, mining, sanitary and METALLURGICAL engineers; [veterinarians] DOCTORS OF VETERINARY SCIENCE; dentists; professional appraisers of connoisseurs of tobacco and other domestic or foreign products, actuaries and interior decorators [marine surveyors; land surveyors; customs, real estate brokers; registered electricians; registered master plumbers and other professionals] ten per centum (10%). (2) Professional entertainers such as actors and actresses, singers and emcees ten per centum (10%). The term actors and actresses shall not include "bit players", [and] "extras" AND "RADIO TALENTS OR CHARACTER PLAYERS" whose roles or performances in a movie, television and RADIO program or stage presentation are subordinate to the actors or actresses and to whom payments made per role, [or] performance or PER PAYMENT BY THE SAME PAYOR does not exceed five hundred pesos (P500.00). (3) Professional athletes, including pelotaries and jockeys ten per centum (10%). (4) [Professional] Movie, stage, [and] RADIO, television [directors] AND musical directors [and band leaders] ten per centum (10%). (5) Management and technical consultants ten per centum (10%). (6) GEODETIC ENGINEERS AND MARINE SURVEYORS five per centum (5%). (7) Insurance agents and INSURANCE ADJUSTERS five per centum (5%). The amount subject to withholding under this paragraph shall include not only the fees, but also per diems, allowances and other remuneration paid. IN THE CASE OF PROFESSIONAL ENTERTAINERS AND ATHLETES, THE AMOUNT-SUBJECT TO WITHHOLDING TAX SHALL ALSO [including] INCLUDE amounts paid to them in consideration of the use of their names or pictures, [or] public appearances either on stage, in print [or] broadcast, OR OTHER media for purposes of advertisements or sales promotion. (b) Professional fees, talent fees, etc., paid to juridical persons . On the gross professional, promotional, talent fees or other remuneration enumerated in the preceding subparagraph paid to taxable juridical persons five per centum (5%). (c) Rentals . When the gross rental or other payment required to be made as a condition to the continued use or possession of property, whether real or personal, to which the payor or obligor has not taken or is not taking title or in which he has no equity, exceeds five hundred pesos (P500.00) PER CONTRACT OR PAYMENT WHICHEVER IS GREATER five per centum (5%). (d) Cinematographic film rentals and other payments . On the gross payments to resident individuals and corporate cinematographic film owners, lessors or distributors five per centum (5%). (e) Amounts paid to certain contractors . ON FIFTEEN PER CENT (15%) of gross payments to the following contractors; whether individual or corporation three per centum (3%). (1) General Engineering; General Building and Specialty Contractors a) General Engineering Contractors . Those whose principal contracting business is in connection with fixed works requiring specialized engineering knowledge and skill including the following divisions or subjects: 1) Reclamation works; 2) Railroads; 3) Highways, streets and roads; 4) Tunnels; 5) Airports and airways; 6) Waste reduction plants; 7) Bridges, overpasses, underpasses, and other similar works; 8) Pipelines and other systems for the transmission of petroleum and other liquid or gaseous substances; 9) Land leveling; 10) Excavating; 11) Trenching; 12) Paving; and 13) Surfacing work. b) General Building Contractors . Those whose principal contracting business is in connection with any structure built, being built, or to be built, for the support, shelter and enclosure of persons, animals, chattels or movable property of any kind, requiring in its construction the use of more than two unrelated building trades or crafts, or to do or superintend the whole or any part thereof. Such structure includes sewers and sewerage disposal plants and systems, parks, playgrounds and other recreational works, refineries, chemical plants and similar industrial plants requiring specialized engineering knowledge and other skill, powerhouse, power plants and other utility plants and installation, mines and metallurgical plants, cement and concrete works in connection with the above-mentioned fixed works. c) Specialty Contractors . Those whose operations pertain to the performance of construction work requiring special skill and whose principal contracting business involves the use of specialized building trades or crafts. (2) OTHER CONTRACTORS a) Filling, demolition and salvage work contractors and operators of mine drilling apparatus; b) Operators of dockyards; c) Persons engaged in the installation of water system, and gas or electric light, heat or power; d) Operators of [arrastre and] stevedoring, warehousing or forwarding establishments; e) Printers, bookbinders, lithographers and publishers except those PRINCIPALLY engaged in the publication or printing [and publication] of any newspaper, magazine, review or bulletin which appears at regular intervals, with fixed prices for subscription and sale; [and which is not devoted principally to the publication of advertisement]; f) Messengerial, janitorial, [and] private detective and/or security agencies and credit and/or collection agencies; g) Advertising agencies; h) INDEPENDENT producers of television, RADIO, and stage performances or shows; i) INDEPENDENT producers of "jingles"; j) Bookkeeping agencies; k) INSURANCE AND INSURANCE ADJUSTERS AGENCIES; l) MANAGEMENT AND CONSULTANCY AGENCIES; m) LABOR RECRUITING AGENCIES; n) ELECTRICAL AND PLUMBING AGENCIES; o) PERSONS ENGAGED IN THE INSTALLATION OF ELEVATORS, CENTRAL AIR-CONDITIONING UNITS, COMPUTER MACHINES AND OTHER EQUIPMENT AND MACHINERIES, AND THE MAINTENANCE SERVICES THEREON; p) PERSONS ENGAGED IN THE SALE OF COMPUTER SERVICES; q) PERSONS ENGAGED IN LANDSCAPING AND INTERIOR DECORATION SERVICES; AND r) PERSONS ENGAGED IN THE COLLECTION AND DISPOSAL OF GARBAGE. (f) Awards and prizes . On awards and prizes in the amount of, or the cash value of which, exceeds [five hundred pesos (P500.00)] THREE THOUSAND PESOS (P3,000.00) TEN per cent (10%). (g) Income distribution to beneficiaries . On income distributed to beneficiaries of estates and trusts as determined under Section 57 of the National Internal Revenue Code. fifteen per centum (15%). (h) INTEREST PAYMENTS ON BONDS OR SIMILAR INDEBTEDNESS . ON INTEREST PAYMENTS OTHER THAN INTEREST WHICH IS EXEMPT FROM INCOME TAX UNDER SECTION 29 (b) (8) (D) OF THE NATIONAL INTERNAL REVENUE CODE, AS AMENDED, ON BONDS OR SIMILAR EVIDENCES OF INDEBTEDNESS, EXCEPT TAX-FREE COVENANT BONDS, THE INTEREST OR OTHER PAYMENT ON WHICH IS SUBJECT TO WITHHOLDING UNDER SECTION 53 OF THE TAX CODE, ISSUED BY ANY CORPORATION AND BY ALL GOVERNMENT AGENCIES INCLUDING GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS FIFTEEN PER CENTUM (15%). (i) AMOUNTS PAID TO CERTAIN BROKERS AND AGENTS . ON GROSS PAYMENTS TO CUSTOMS AND REAL ESTATE BROKERS AND AGENTS OF PROFESSIONAL ENTERTAINERS FIVE PER CENTUM (5%) . (j) AMOUNTS PAID TO DIRECTORS OF CORPORATIONS . ON GROSS PAYMENTS OR PER DIEMS, ALLOWANCES, AND OTHER FORMS OF REMUNERATION FOR SERVICES PERFORMED AS MEMBER OF BOARD OF DIRECTORS OF CORPORATIONS TEN PER CENTUM (10%). "SECTION 2. Persons required to deduct and withhold . The following persons are hereby constituted as withholding agents for purposes of the tax required to be withheld on income payments enumerated in the preceding section: (a) An individual, with respect to payments made in connection with his trade or business; (b) Any juridical person, whether or not engaged in trade or business; and (c) All government offices including government-owned or controlled corporations as well as provincial, city and municipal governments. "SECTION 3. TIME OF WITHHOLDING . THE OBLIGATION OF THE PAYOR TO DEDUCT AND WITHHOLD UNDER THESE REGULATIONS ARISES AT THE TIME AN INCOME WHICH IS SUBJECT TO WITHHOLDING UNDER SECTION 1 HEREOF IS PAYABLE OR PAID. "SECTION 4. EXEMPTION FROM WITHHOLDING . THE WITHHOLDING OF TAX HEREIN PRESCRIBED SHALL NOT APPLY TO INCOME PAYMENTS TO THE FOLLOWING: (a) NATIONAL GOVERNMENT AND ITS INSTRUMENTALITIES, INCLUDING PROVINCIAL, CITY OR MUNICIPAL, GOVERNMENTS, AS WELL AS GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS; (b) PERSONS ENJOYING INCOME TAX EXEMPTIONS; AND (c) EXEMPT ORGANIZATIONS UNDER SECTION 27 OF THE NATIONAL INTERNAL REVENUE CODE AS AMENDED, EXCEPT INCOME DERIVED FROM REAL OR PERSONAL PROPERTY, OR FROM ANY ACTIVITY CONDUCTED FOR PROFIT. THE EXEMPTION SHALL BE ALLOWED ONLY IF THE PAYEE ABOVE-MENTIONED IN THE SUB-PARAGRAPHS (b) AND (c) SHALL HAVE PRESENTED TO THE PAYOR A CERTIFICATE OF EXEMPTION ISSUED BY THE COMMISSIONER OF INTERNAL REVENUE. "SECTION 5. Quarterly return and payment of taxes withheld at source . Taxes deducted and withheld under these Regulations shall be covered by a return (BIR Form 1743-A) for each calendar quarter and paid on or before the last day of the month following the close of the quarter to the Commissioner of Internal Revenue or to his Collection Agent in the city or municipality where the withholding agent has his legal residence or principal place of business. In places where payment thru banks is the prescribed procedure, payment must be made to any of the authorized agency banks. If the amount of taxes deducted and withheld amounts to five hundred pesos or more during the month, it shall be the duty of every withholding agent to pay within twenty (20) days after the month in which the withholding was made. Provided, that taxes withheld during the last month of the quarter by the withholding agent may be remitted not later than the last day of the month after the close of the quarter. The taxes deducted and withheld by the withholding agent shall be held in trust for the government until paid to the collecting officers. If the payor is the Government of the Philippines or any political subdivision or agency thereof or government-owned or controlled corporation, the return prescribed (BIR Form 1743-A) shall be made by the officer or employee having control of the payments or by any duly designated officer or employee. "SECTION 6. (a) Every payor required to deduct and withhold taxes under these Regulations shall furnish each CORPORATE OR INDIVIDUAL PAYEE a written statement (BIR FORM 1743) UPON PAYMENT OR AT THE TIME HE IS REQUIRED TO WITHHOLD, showing the income payment made by him and the amount of taxes deducted and withheld therefrom. THE STATEMENT MUST BE SIGNED BY THE PAYOR OR HIS AUTHORIZED OFFICER. The amount so withheld shall be allowed as a tax credit against the income tax liability of the payee IN THE TAXABLE YEAR OR QUARTER IN WHICH THE INCOME WAS EARNED OR RECEIVED. (b) Annual Return of Income Tax Withheld at Source . The payor is also required to file with the Commissioner of Internal Revenue, Withholding Tax Division, Revenue Regional Director, Revenue District Officer, Collection Agent of the city or municipality in which the payor has his legal residence or principal place of business, or where the government office is located, on or before the 1st day of March of the year next following the year in which payments were made, an annual return of income tax withheld at source (BIR Form 1743-B), showing the following information: (1) The official receipt, date of payment and amount paid for each quarter; (2) Name, address, and taxpayer's account number of payees; and (3) Nature of income payment, gross amount and amount of tax withheld from each payee. Any person subject to the requirements of these Regulations shall be exempt from compliance with the requirements of Section 77 of the National Internal Revenue Code and the Regulations thereunder with respect only to payments from which tax has been withheld. aisa dc "SECTION 7. Verification of returns and statements . Any return, statement or other document required to be filed under these Regulations shall contain or be verified by a written declaration that it is made under the penalties of perjury and this declaration shall be in lieu of any oath otherwise required. "SECTION 8. ANY FAILURE TO COMPLY WITH THE PROVISIONS OF THESE REGULATIONS SHALL BE SUBJECT TO AD VALOREM AND SPECIFIC PENALTIES. (a) SURCHARGES FOR FAILURE TO RENDER RETURNS, AND FOR RENDERING FALSE OR FRAUDULENT RETURNS; DELINQUENCY IN PAYMENT OF TAXES . IN CASE OF ANY FAILURE TO MAKE AND FILE A RETURN (BIR FORM 1743A) WITHIN THE TIME PRESCRIBED HEREIN, NOT DUE TO WILLFUL NEGLECT, THERE SHALL BE ADDED TO THE TAX TWENTY-FIVE PER CENTUM (25%) OF THE AMOUNT OF SUCH TAX, EXCEPT THAT WHEN A RETURN IS VOLUNTARILY AND WITHOUT NOTICE FROM THE COMMISSIONER OR ANY OTHER REVENUE OFFICER FILED AFTER SUCH TIME, AND IT IS SHOWN THAT THE FAILURE TO FILE IT WAS DUE TO REASONABLE CAUSE, NO SUCH ADDITION SHALL BE MADE TO THE TAX. IN CASE THE FAILURE TO MAKE AND FILE A RETURN IS DUE TO WILLFUL NEGLECT OR IN CASE A FALSE OR FRAUDULENT RETURN IS WILLFULLY MADE, THERE SHALL BE ADDED TO THE TAX OR TO THE DEFICIENCY TAX TO BE REMITTED, IN CASE ANY PAYMENT HAS BEEN MADE ON THE BASIS OF SUCH RETURN BEFORE THE DISCOVERY OF THE FALSITY OR FRAUD, A SURCHARGE OF FIFTY PER CENTUM (50%) OF THE AMOUNT OF SUCH TAX OR DEFICIENCY TAX. IN CASE THE TAXES DEDUCTED AND WITHHELD BY THE PAYOR ARE NOT PAID OR REMITTED WITHIN THE TIME PRESCRIBED, THERE SHALL BE ADDED A SURCHARGE OF FIVE PER CENTUM (5%) ON THE AMOUNT OF TAX UNPAID AND INTEREST AT THE RATE OF FOURTEEN PER CENTUM (14%) PER ANNUM UPON THE AMOUNT REQUIRED TO BE PAID AND FROM THE TIME THE SAME BECAME DUE UNTIL PAID. (b) PENALTIES FOR FAILURE TO FILE RETURN AND FOR FILING FRAUDULENT RETURNS OR STATEMENT OR TO PAY TAX . ANY PAYOR LIABLE TO PAY TAX OR REMIT THE TAX, TO MAKE A RETURN OR TO FURNISH THE STATEMENT OF INCOME PAYMENT AND TAXES WITHHELD FROM THE PAYEE REQUIRED UNDER THESE REGULATIONS, WHO REFUSES OR NEGLECTS TO PAY SUCH TAX, TO MAKE SUCH RETURNS AT THE TIME OR TIMES HEREIN SPECIFIED SHALL BE PUNISHED BY A FINE OF NOT MORE THAN TWO THOUSAND PESOS (P2,000.00) AND BY IMPRISONMENT FOR NOT MORE THAN SIX (6) MONTHS. ANY INDIVIDUAL OR ANY OFFICER OF ANY CORPORATION OR GENERAL CO-PARTNERSHIP REQUIRED BY LAW TO MAKE, RENDER, SIGN, AND VERIFY ANY RETURN, WHO MAKES ANY FALSE OR FRAUDULENT STATEMENT WITH INTENT TO DEFEAT OR EVADE WITHHOLDING UNDER THESE REGULATIONS, SHALL BE PUNISHED BY A FINE OF NOT MORE THAN FIVE THOUSAND PESOS (P5,000.00) AND IMPRISONMENT OF NOT LESS THAN TWO (2) YEARS. IF ANY CORPORATION OR DULY REGISTERED CO-PARTNERSHIP SHALL REFUSE OR NEGLECT TO MAKE A RETURN AT THE TIME OR TIMES HEREIN BEFORE SPECIFIED, OR SHALL RENDER A FALSE OR FRAUDULENT RETURN, SUCH CORPORATION OR PARTNERSHIP SHALL BE LIABLE TO A FINE OF NOT EXCEEDING TWENTY THOUSAND PESOS (P20,000.00). "SECTION 9. Requirement for deductibility . Any income payment, which is otherwise deductible under Sections 30 and 57 of the Tax Code, as amended, shall be allowed as a deduction from the payor's gross income only if it is shown that the tax required to be withheld has been paid to the Bureau of Internal Revenue in accordance with Section 53, 54, 91 and 93 also of the Tax Code: Provided , that this additional requirement shall apply only to payment made on or after the date of the effectivity of these Regulations. "SECTION 10. Claims for tax credit or refund . Claims for tax credit or refund of income tax deducted and withheld on income payments shall be given due course only when it is shown on the return that the income payment received was declared as part of the gross income and, the fact of withholding is established by a copy of the statement duly issued by the payor to the payee (BIR Form No. 1743) showing the amount paid and the amount of tax withheld therefrom. "SECTION 11. Effectivity . These Regulations shall apply only to income payments made beginning November 1, 1978. THESE SUPPLEMENTARY REGULATIONS SHALL APPLY TO INCOME PAYMENTS MADE BEGINNING JULY 1, 1979. Enforcement and Publicity All internal revenue officers and others charged with the enforcement of internal revenue laws are hereby enjoined to enforce the provisions of this Revenue Regulations accordingly and to give it as wide a publicity as possible. aisa dc EFREN I. PLANA Acting Commissioner