1. The document is a ruling from the Bureau of Internal Revenue (BIR) regarding the tax treatment of services provided by Business Process Outsourcing International, Inc. (BPO).
2. The BIR confirms that BPO's bookkeeping and internal audit services are subject to a 10% or 15% creditable withholding tax (CWT) on professionals.
3. The BIR also confirms that BPO's payroll processing, HR benefit administration, data processing, and staff outsourcing services are subject to a 2% CWT on contractors.
1. The document is a ruling from the Bureau of Internal Revenue (BIR) regarding the tax treatment of services provided by Business Process Outsourcing International, Inc. (BPO).
2. The BIR confirms that BPO's bookkeeping and internal audit services are subject to a 10% or 15% creditable withholding tax (CWT) on professionals.
3. The BIR also confirms that BPO's payroll processing, HR benefit administration, data processing, and staff outsourcing services are subject to a 2% CWT on contractors.
1. The document is a ruling from the Bureau of Internal Revenue (BIR) regarding the tax treatment of services provided by Business Process Outsourcing International, Inc. (BPO).
2. The BIR confirms that BPO's bookkeeping and internal audit services are subject to a 10% or 15% creditable withholding tax (CWT) on professionals.
3. The BIR also confirms that BPO's payroll processing, HR benefit administration, data processing, and staff outsourcing services are subject to a 2% CWT on contractors.
1. The document is a ruling from the Bureau of Internal Revenue (BIR) regarding the tax treatment of services provided by Business Process Outsourcing International, Inc. (BPO).
2. The BIR confirms that BPO's bookkeeping and internal audit services are subject to a 10% or 15% creditable withholding tax (CWT) on professionals.
3. The BIR also confirms that BPO's payroll processing, HR benefit administration, data processing, and staff outsourcing services are subject to a 2% CWT on contractors.
This refers to your letter dated September 18, 2007 stating that your company, Business Process Outsourcing International, Inc. ("BPO"), with business address at 7/F SGV II Building, 6758 Ayala Avenue, Makati City, is a domestic company engaged in the business of performing outsourced services for various clients. BPO is registered with the Department of Labor and Employment ("DOLE") as a contractor/subcontractor. BPO provides the following services: a. Bookkeeping — BPO records transactions based on supporting documents supplied by clients; maintains accounting records; prepares trial balances and nancial reports/statements; and assists in the preparation of tax returns and annual renewal of permits and licenses. b. Internal Audit — BPO renders internal audit work to clients by using either the clients' audit plan and programs or BPO's own audit programs or a combination of both. BPO checks compliance with established procedures and processes; performs substantive testing through examination of supporting documents and reports; and provides recommendations for the deviations and weaknesses identi ed. BPO also renders xed-asset and inventory veri cation and reconciliation. ADHCSE
c. Payroll Processing — BPO processes the payroll of clients using its own payroll system. It uses as basis the data supplied by clients such as attendance information, new hires, resignations, additional earnings, deductions, and other relevant payroll data necessary for the computation of net pays of clients' employees. BPO also computes the nal pay of resigning employees and prepares the alphabetical listing, certi cates of withholding tax and all the reports related to Social Security System ("SSS"), Philippine Health Insurance Corporation ("Philhealth") and Home Development Mutual Fund ("HDMF") premium contributions and loan repayments. d. Human Resources ("HR") Bene t Administration — BPO assists in the processing of the applications for Bureau of Internal Revenue ("BIR") tax identi cation number and SSS, Philhealth and HDMF membership CD Technologies Asia, Inc. 2018 cdasiaonline.com of clients' new hires. BPO also assists in processing the applications of clients' employees for (a) medical bene t, housing, salary and other loans with the SSS and HDMF and (b) employee loans with the clients. CaHcET
e. Data Processing — BPO processes payable transactions by matching
invoices to related purchase and receipt documents or service contracts, and generating report of items for payment. It also processes billing, collection and remittance transactions. BPO also processes expense/claims reports by verifying supports to expenses/claims for reimbursements. Finally, BPO processes data related to attendance and leave availments of clients' employees. f. Staff Outsourcing — BPO assigns its staff to clients for a temporary period (mostly short to medium term) to provide speci c services such as inventory-taking; procurement, sales and inventory monitoring; bank and third party reconciliation of accounts; HR administrative work; data processing; and other nance and non- nance related work. BPO staff is made to work in the client's premises, following the client's work schedule. BPO staff submit their work output to the client's designated o cer. If, for any reason, the assigned staff are unable to complete the service period or if their performance do not meet client's expectations, BPO endeavors to provide replacements. The assigned staff will remain the employees of BPO. ESHcTD
BPO has adequate capitalization. It performs activities which are not directly related to the business of its clients. BPO assigned staff are selected, hired and terminated by BPO and not by their clients. Salaries and other bene ts are also drawn directly from BPO and not from the clients. BPO carries on an independent business and undertakes the performance of its contract according to its own manner and method, free from the control and supervision of its clients. BPO is engaged by clients to provide speci c and special jobs or services such as inventory-taking; procurement, sales and inventory monitoring; bank and third party reconciliation of accounts; HR administrative work; data processing and other nance and non- nance related work. It does not act as a recruitment agency to provide manpower for all types of services to its clients. It provides manpower services requiring specialized skills in accountancy, human resources, procurement, sales and related fields; ICcaST
In connection therewith, you are requesting confirmation of your opinion that —
1. The income payments to BPO for bookkeeping and internal audit services are subject to 10% or 15% CWT on professionals pursuant to Section 3 of Revenue Regulations ("RR") No. 30-03; and 2. The income payments to BPO for payroll processing, HR bene t administration, data processing services, and staff outsourcing services are subject to 2% CWT on contractors pursuant to Section 3 of RR No. 6-01. In reply, please be informed that your opinion is hereby confirmed as follows: A. Bookkeeping and Internal Audit Services CD Technologies Asia, Inc. 2018 cdasiaonline.com BPO's bookkeeping and internal audit services fall under the category of professional services mentioned in Section 3 of RR No. 30-03. This provision states: "SEC. 2.57.2. Income Payment Subject to Creditable Withholding Tax and Rates Prescribed Thereon. — Except as herein otherwise provided, there shall be withheld a creditable income tax at the rates herein speci ed for each class of payee from the following items of income payments to persons residing in the Philippines:
(A) Professional fees, talent fees, etc., for services rendered by individuals — On the gross professional, promotional and talent fees or any other form of remuneration for the services of the following individuals — Fifteen percent (15%), if the gross income for the current year exceeds P720,000; and Ten percent (10%), if otherwise;
xxx xxx xxx
(6) Management and technical consultants
(7) Bookkeeping agents and agencies
xxx xxx xxx
(B) Professional fees, talent fees, etc. for services of taxable juridical persons — On the gross professional, promotional and talents fees, or any other form of remuneration enumerated in the preceding subparagraph for the services of taxable juridical persons — Fifteen percent (15%), if the gross income for the current year exceeds P720,000; and Ten percent (10%), if otherwise; . . . ." (Emphasis supplied)
Bookkeeping services are expressly subject to 10% or 15% CWT on
professionals. In rendering internal audit services, BPO provides advice or guidance to clients to ensure that the client's processes comply with established procedures relating to accounting-related transactions. Thus, BPO's internal audit services may be considered as management and technical consultancy services which are likewise subject to 10% or 15% CWT on professionals, 15% if the gross income for the current year exceeds 720,000, and 10% if otherwise, pursuant to Sec. 2.57.2 (B) of RR No. 30- 2003. (BIR Ruling No. DA-272-03 dated August 20, 2003) B. Payroll Processing, HR Bene t Administration, Data Processing, and Staff Outsourcing Services BPO's payroll processing, HR bene t administration, data processing services, and staff outsourcing services qualify under the category of contractual services mentioned in Section 3 (E) of RR No. 6-01, which states: (E) Income payments to certain contractors — On gross payments to the following contractors, whether individual or corporate — Two percent (2%) xxx xxx xxx (4) Other contractors —
xxx xxx xxx
(g) Managerial, janitorial, private detective and/or security agencies, credit and/or collection agencies and other business agencies; . . . ." (Emphasis supplied) CD Technologies Asia, Inc. 2018 cdasiaonline.com Accordingly, the above-mentioned services rendered by BPO to its clients qualify BPO under the category of a service contractor covered by the phrase "other business agencies" pursuant to Sec. 3 (E) (g) of RR No. 6-01, thus, income payments for said services are subject to the 2% CWT. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void.cCTAIE
