Question & AnswerQ&A (BIR REVENUE MEMORANDUM CIRCULAR NO. 26-2009)
The circular revokes BIR RR7 Ruling No. RR 7-003-876, which addressed the exemption from the 2% creditable withholding tax on the sale of services, specifically relating to Trendset Manpower Services.
The error was treating the basis for the 2% creditable withholding tax as the gross receipts excluding amounts earmarked for particular purposes, such as salaries, instead of the entire gross income.
The correct basis is the gross income without any qualification or deduction, in line with Revenue Regulations No. 2-98 and No. 17-2003.
Section 2.57.2 (A) is cited, which covers gross professional, promotional, and talent fees or any other form of remuneration for services.
Because the issue settled was not among those listed in Revenue Memorandum Order No. 75-99 and Revenue Memorandum Circular No. 3-2001, which define the delegated authorities.
All other rulings inconsistent with this circular are also considered revoked.
It is a withholding tax prescribed on the gross income from the sale of services, meant as a prepayment of the income tax liability of the service provider.
Commissioner of Internal Revenue Sixto S. Esquivias IV.
All concerned are enjoined to be guided accordingly and to give this circular as wide publicity as possible.