Professional Documents
Culture Documents
Lowe Ruling (BIR Ruling (DA - (C-283) 705-09)
Lowe Ruling (BIR Ruling (DA - (C-283) 705-09)
Lowe Ruling (BIR Ruling (DA - (C-283) 705-09)
DA484-04; DA353-97
Gentlemen :
This refers to your letter dated October 23, 2009 stating that your client,
LOWE, INC. (LOWE), is an advertising agency duly registered with the Securities
and Exchange Commission (SEC); that LOWE enters into contracts with media
and production suppliers (Suppliers) for and in behalf of its clients; that the
Suppliers in consideration of the media and production packages and services, bills
the client through LOWE and in turn LOWE bills its clients of what the suppliers
bill it and adds a fee or the applicable commission rate for its services; that LOWE
sends the bills of the Suppliers with its fees to the clients; that the clients pay
LOWE the total amount billed and withholds the creditable withholding tax
(CWT) for the full amount of LOWE's billings the amount the Suppliers bills
through LOWE and the commissions it earns and remit whatever they withhold to
the Bureau of Internal Revenue (BIR); that when LOWE receives these payments,
LOWE pays the Suppliers for the amount they have billed through LOWE and
retains the commissions it earns; that LOWE in turn withholds the CWT from
what it pays the Suppliers and remit whatever it withholds to the BIR; that it is to
be noted that LOWE uses the CWT withheld by its clients covering the total
billings it sends to the Clients (the amount the Suppliers bills LOWE and the
commissions it earns) when LOWE files its income tax returns for its
commissions; and that this is the reason why the CWT (if grossed up), claimed by
LOWE as creditable tax to its income tax return is bigger than its income.
Based on the foregoing representations, you now request for an opinion that
although LOWE claimed higher CWT as reflected in its income tax returns,
LOWE cannot be faulted and it cannot be subjected to assessment or further
imposition of income taxes since the CWT withheld by its clients are based on the
Copyright 2020 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Second Release 2020 1
total billings of LOWE, i.e., the amount the suppliers bill LOWE and the
commissions it earns, as the advertising costs and expenses paid to media and
production suppliers cannot and should not form part of LOWE's taxable gross
receipts.
Thus, it is vitally important to stress that while the CWT being claimed by
LOWE to the BIR may appear higher as against the net taxable income of LOWE,
the government is not at all prejudiced as the CWT on media and production costs
as billed by the suppliers are also withheld by LOWE and remitted to the BIR.
Consequently, the revenues reported by LOWE in its tax returns are deemed
correct as there is no under declaration of income made to the BIR.
SUCH BEING THE CASE, this Office holds LOWE cannot be faulted and
be subjected to the imposition of income taxes when it claimed higher CWT as
reflected in its income tax returns, which CWT withheld by its clients is based on
the total billings of LOWE, i.e., the amount the suppliers bill LOWE and the
Copyright 2020 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Second Release 2020 2
commissions it earns.
Copyright 2020 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia Second Release 2020 3