005 SONZA v. ABS-CBN (Sarmiento edited by CELAJE) are those under an employer-employee relationship.

This different tax treatment

June 10, 2004 | Carpio, J. | VAT accorded to talents and broadcasters bolters our conclusion that they are
independent contractors, provided all the basic elements of a contractual
PETITIONER: Joey Sonza relationship are present as in this case. Thus, Sonza is liable for VAT.
RESPONDENTS: ABS-CBN

SUMMARY: GNOTES: This case differentiated between services rendered pursuant to an

employer-employee relationship (which is an exempt transaction) and services
Respondent (“ABS-CBN”) signed an (“Agreement”) with the Mel and Jay
rendered by an independent contractor pursuant to a contractual relationship
Management and Development Corporation (“MJMDC”). Referred to in the
(which is subject to VAT). The Supreme Court ruled that Sonza was an
Agreement as “AGENT,” MJMDC agreed to provide SONZA’s services
independent contractor. As such, he was subject to VAT on the services that he
exclusively to ABS-CBN as talent for radio and television. SONZA wrote a
rendered.
letter to ABS-CBN’s President, Eugenio Lopez III about the recent event
concerning his program and career, and that the said violation of the company
has breached the agreement, thus, the notice of rescission of the Agreement was
sent. SONZA filed a complaint against ABS-CBN. SONZA complained that
ABS-CBN did not pay his salaries, separation pay, service incentive leave pay,
13th month pay, signing bonus, travel allowance and amounts due under the DOCTRINE: The (NIRC) in relation to Republic Act No. 7716, as amended by
Employees Stock Option Plan (“ESOP”).ABS-CBN filed a Motion to Dismiss Republic Act No. 8241, treats talents, television and radio broadcasters
on the ground that no employer-employee relationship existed between the differently. Under the NIRC, these professionals are subject to the 10% value-
parties. Issue is whether or not Sonza is an employee of ABS-CBN as the added tax (VAT) on services they render. Exempted from the VAT are those
relationship is necessary to determine the tax liability of Sonza. The Court under an employer-employee relationship. This different tax treatment accorded
held in the negative. Applying the control test to the present case, we find that to talents and broadcasters bolters our conclusion that they are independent
SONZA is not an employee but an independent contractor. The control test is the contractors, provided all the basic elements of a contractual relationship are
most important test our courts apply in distinguishing an employee from an present as in this case.
independent contractor. In this case, ABS-CBN did not assign any other work to
SONZA. To perform his work, SONZA only needed his skills and talent. How
SONZA delivered his lines, appeared on television, and sounded on radio were
outside ABS-CBNs control. SONZA did not have to render eight hours of work
per day. ABS-CBN could not dictate the contents of SONZAs script. However,
the Agreement prohibited SONZA from criticizing in his shows ABS-CBN or its
interests. The clear implication is that SONZA had a free hand on what to say or
discuss in his shows provided he did not attack ABS-CBN or its interests.

For purposes of taxation, the (NIRC) in relation to Republic Act No. 7716, as
amended by Republic Act No. 8241, treats talents, television and radio
broadcasters differently. Under the NIRC, these professionals are subject to the
10% value-added tax (VAT) on services they render. Exempted from the VAT