Revocation of BIR Ruling on Withholding Tax Basis

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BIR REVENUE MEMORANDUM CIRCULAR NO. 26-2009: Revocation of BIR Ruling on Withholding Tax Basis

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Title Supreme Court: Revocation of BIR Ruling on Withholding Tax Basis

Law: Bir Revenue Memorandum Circular No. 26-2009

Decision Date: May 11, 2009

The Bureau of Internal Revenue revokes the 2006 ruling that allowed Trendset Manpower Services to exclude certain amounts from gross receipts for computing the 2% creditable withholding tax, reaffirming that the basis for withholding tax must be the total gross income without qualifications.

withholding tax

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Legal Framework and Interpretation of Gross Income

The circular emphasizes that the correct basis for withholding tax is the GROSS INCOME without any exclusions or qualifications.
This interpretation is consistent with Revenue Regulations No. 2-98, as amended by Revenue Regulations No. 17-2003.
Specifically referenced is Section 2.57.2 (A) covering gross professional fees, promotional fees, talent fees, and other service remunerations.

Authority and Scope of Regional Director's Ruling

The Regional Director’s ruling is declared to have no legal basis and is beyond the delegated authority.
The issue addressed does not fall within the purview of matters settled under Revenue Memorandum Order No. 75-99 and Revenue Memorandum Circular No. 3-2001, as amended by Circular No. 39-2001.

Revocation of Prior Ruling and Consistency

The circular formally revokes BIR RR 7 Ruling No. RR7-003-876 dated September 13, 2006.
Any other rulings inconsistent with this circular are also revoked.

Directive to All Concerned

All concerned parties are enjoined to comply and be guided by this circular.
There is a call for wide publicity to ensure proper dissemination of the revocation and correct tax basis interpretation.

Adoption and Authority

The circular was adopted and signed by the Commissioner of Internal Revenue, Sixto S. Esquivias IV, on May 11, 2009.

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