VAT Ruling No. 070-90

March 23, 1990 VAT RULING NO. 070-90 Federation of Customs Brokerage Companies of the Philippines 640-642 Sto. Tomas Street Intramuros, Manila Attention: Mr . Oscar M . Sevilla President Gentlemen : This refers to your letter dated June 15, 1989 stating that one of your members, A. Sevilla Brokerage Corporation, has referred to you for proper representation with this Office BIR Ruling No. 50(b)/102-000-00-489-88 (dated October 11, 1988) subjecting payments to customs brokers exclusively covering advances and government charges (such as arrastre, storage, documentary stamps, wharfage, demurrage and other government fees) fully supported with official receipts to the 5% expanded withholding tax; that said customs brokers do not derive any income from these advances since they merely collect what they have advanced in behalf of their clients. cdll Based on the foregoing representations, you now request for a review of BIR Ruling No. 50(b)/102-000-00-489-88 dated October 11, 1988 and its subsequent modification. In reply, please be informed as follows: 1. Gross income payment, for purposes of the expanded withholding tax (EWT), shall have the same scope as the gross receipts of a customs broker as defined in Section 102(a)(3) of the Tax Code, as amended, to wit: " Gross receipts " means the total amount of money or its equivalent represents the contract price, compensation or service fee, including the amount charged for materials supplied with the services and deposits or advance payments actually or constructively received during the taxable quarter for the services performed or to be performed for another person excluding the value-added tax. 2. Deposits or advance payment of the customs broker's compensation or service fee shall form part of the gross receipts for purposes of the VAT and the expanded withholding tax. 3. Advance payments by the customs broker for expenses such as arrastre, wharfage, form and waybills, magna scale, documentation fee, trucking and handling charges shall not form part of the broker's gross receipts if invoiced directly in the name of the broker's clients by the person performing such service and if the reimbursement, to the broker is not invoiced with the broker's VAT invoice/official receipt. 4. Advance payment for transportation, overtime and facilitation fee being expenses obviously incurred for the customs broker's benefit to facilitate the clearing of goods through customs, shall form part of the broker's gross receipts notwithstanding that the same is reimbursed by the client. Accordingly, Item No. 1 of BIR Ruling No. 50(b)/102-000-00-489-88 is hereby modified insofar as the aforesaid advances and government charges are concerned. cdtech Very truly yours, JOSE U. ONG Commissioner of Internal Revenue