January 27, 1966

Mr. David C. Obnillas
No. 1 Buendia Avenue
Makati, Rizal

S i r :

This has reference to your letter dated January 4, 1966, inquiring as to whether or not uncollected accounts or accounts receivable may be included as basis in computing the three per cent contractor's tax. prll

In reply, I have the honor to inform you that the 3% tax prescribed in Section 191 of the Tax Code is based on the actual receipts of the contractor. Accordingly, accounts which remain uncollected at the end of the month should not be declared for taxation during the month for purposes of the percentage tax. However, the said amounts should be returned for taxation and the tax due thereon paid during the month in which they are collected.

The foregoing rule is applicable to you, notwithstanding the fact that you have adopted the accrual method of accounting for income tax purposes. cdta

Very truly yours,

(SGD.) MISAEL P. VERA
Commissioner of Internal Revenue