(1) Provisional Advances for arbitrator’s fees are composed of: (a) arbitrator’s fees (“Arbitrator’s Fees”); and (b) fees for services extended by PDRCI to arbitrators (“PDRCI Development Fund”), set at 10% of the Arbitrator’s Fees.
(2) Payments received by PDRCI for Arbitrator’s Fees are received in trust for the arbitrators and not for the account of PDRCI. PDRCI shall issue acknowledgment receipts for such payments. Arbitrator’s Fees are released solely and directly by PDRCI. Once released by PDRCI, the Arbitrator’s Fees are deemed paid by the parties to the arbitrators, in accordance with PDRCI’s
Guidelines on Arbitrator’s Compensation (“Guidelines on Arbitrator’s Compensation”). Any agreement of the parties that allows a party or an entity other than PDRCI to pay Arbitrator’s Fees or arbitration-related expenses to an arbitrator directly, or to any other person, are superseded by these Guidelines on Fees.
(3) For purposes of releasing the Arbitrator’s Fees to the arbitrators, PDRCI shall act as the parties’ authorized agent for the sole purpose of withholding and remitting to the Bureau of Internal Revenue (“BIR”) the withholding taxes due on the Arbitrator’s Fees, if any.3 For this purpose, the parties and the arbitrators shall provide to PDRCI all relevant tax information (see Schedules “B” and “C”). A Certificate of Tax Withheld shall be issued to the arbitrators,
3 Philippine tax laws specify the income payments that are subject to creditable withholding tax (“CWT”). Under existing tax laws, rules and regulations, payments of administrative and Arbitrator’s Fees are generally not subject to CWT. Payments received by PDRCI in trust for arbitrators do not qualify as payments of professional, talent or promotional fees that are subject to CWT under Section 2.57.2.(A) of Revenue Regulation No. 2-98, as amended, which expressly identifies the individuals the payments of fees to whom are subject to CWT. Arbitrators do not fall under the catchall clause introduced under Revenue Regulations No. 3-03 (amending paragraph 1 Section 2.57.2.(A)), i.e.,“those individually engaged in the practice of … all other profession requiring government licensure examinations and/or regulated by the Professional Regulations Commission, Supreme Court,” etc. Nevertheless, parties to PDRCI arbitrations have sought in the past to subject to CWT payments intended for PDRCI arbitrators. In light of specific procedures for the release of Arbitrator’s Fees, the withholding of taxes by parties may make it difficult for the arbitrators to claim tax credits. These Guidelines addresses this ensuring that the withholding of taxes are made in accordance with Philippine tax laws/rules. In the interest of harmonizing the withholding tax rates to be applied to arbitrator ’s fees, PDRCI shall adopt and apply the 15% rate applicable to payments made to professionals under Revenue Regulations No. 2-98. except in the case of an arbitrator whose tax withheld is considered as a final withholding tax under Philippine tax laws and regulations.
(4) The Arbitrator’s Fees shall be exclusive of VAT. The parties shall be assessed the amount of VAT due on the Arbitrator’s Fees, which shall be paid as part of the advance on cost to PDRCI. Prior to acceptance of their nomination, arbitrators
shall advise PDRCI in writing whether or not they are subject to VAT. The parties and the arbitrators acknowledge that the release of the Arbitrator’s Fees to the arbitrators is the income- generating event for purposes of withholding taxes, if
any. The date of receipt by the arbitrators of the Arbitrator’s Fees shall be considered to be the date of payment of Arbitrator’s Fees from which the payment of VAT, if applicable, shall be reckoned. PDRCI shall authorize the release of Arbitrator’s Fees to the arbitral tribunal in accordance with the Schedule of Fees and, upon such release, the arbitrators shall issue an official receipt to the paying party. The parties agree that they shall not withhold any tax or claim input VAT on the Arbitrator’s Fees unless and until such fees are actually paid to the arbitrators by PDRCI on the parties’ behalf in accordance with its Guidelines on Arbitrator’s’ Compensation.
(5) PDRCI may assign to an ArbitrationMonitoring Committee (“Committee”) the performance of any of its functions under these Guidelines on Fees. The Committee shall be composed of at least three (3)
4 In case of an arbitrator who is a on-resident alien not engaged in trade or business in the Philippines (i.e. is an alien who comes to the Philippine and stays for an aggregate period of 180 days or less during any calendar year) and renders services in the Philippines, the payments of Arbitrator’s Fees shall be subject to the 25% final withholding tax. members: (a) the Treasurer, who shall act as Chairman; (b) Secretary General; and (c) appointee/s of the President. The CounselIn-Charge of the file may be invited by the Committee to sit in its deliberations as an ex-officio member. The Committee cannot amend the Schedule of Fees.
(6) Except as the parties or the arbitral tribunal may agree otherwise, or PDRCI decides in exceptional circumstances at the request of the arbitral tribunal, the Chair of the arbitral tribunal shall be entitled to forty percent (40%) and each
arbitrator, thirty percent (30%), of the Arbitrator’s Fees.
(7) Except as PDRCI may direct otherwise, taking into account all relevant circumstances, PDRCI shall release Arbitrator’s Fees in accordance with its Guidelines on Arbitrator’s Compensation.
(8) The PDRCI Development Fund shall be treated in the same manner as Administrative Fees under Article 3 below.