BIR Ruling

January 29, 1973 Mr. Pedro M. Manatad Certified Public Accountant P. O. Box 3957 Manila S i r : This refers to your letter dated October 30, 1973 stating that your client, the Philippine-Japan Active Carbon Corporation has a Board of Investment registry certificate No. 71-60, as a preferred pioneer enterprise under Republic Act No. 6135, for the production, manufacture and export of activated carbon. With the foregoing premise you would like to be clarified of the following: cdta "a) If it is still necessary and proper to obtain from this Office a 'certificate of exemption' from all taxes under the National Internal Revenue Code (NIRC), for the exemption granted in Section 8, paragraph a) of R. A. 5186 as mentioned in Section 7 of R. A. 6135. We are of the idea that 'just not to pay' or purposely abstaining from paying any NIRC tax by reason of the exemption is not enough. If so, please consider this as a request for such certification. "b) For 1972, the corporate basic residence tax of P5.00, and privilege tax receipts of P150.00 were paid for manufacturer, importer and exporter PTR at P50.00 each, while documentary and science stamps were affixed, totalling P8,709.00 to stock certificates' stubs. 1) As these tax payments are not specifically included in those to be recommended by the BOI to the Secretary of Finance for tax credit purposes, can we apply for tax credit directly with your good Office? 2) In relation to a) above, we hold the view that we shall pay only P1.25 basic residence tax and P12.50 for each PTR for the years 1973 up to 1975 (P5.00 and P50.00, respectively, less the 75% exemption. 3) As the paid up capital is expected to be doubled next year or so, we will affix documentary and science stamps totalling P2,177.25 only, not P8,709.00 for the same amount of capital stock to be paid for. "c) For the years after 1972, and subject to the graduated exemption rates for the periods specified in Section 8, paragraph a) of R. A. 5186, and specially for the years after 1981, please clarify for us whether: 1) The company is covered by Section 186 of the NIRC, imposing the 7% manufacturer's tax, with activated carbon as an ordinary or 'other' article. 2. The company can avail of the exemption in Section 188 of the NIRC in paragraph b) under 'Agricultural Products'. The company buys locally coconut shell and mangrove charcoals which it uses and is the main raw material in the manufacture of the activated carbon. 3. The tax credit described in Section 7, paragraph a) of R. A. 6135 is conclusive as to exempt the company from the payment of the 7% manufacturer's tax." In reply, I have the honor to inform you as follows: The issuance by the Board of Investments of a certificate of Registration to an applicant under Republic Act No. 6135 is conclusive as to the enterprise entitlement to all the benefits under the law, hence, it is not necessary to obtain from this Office a separate certificate of exemption from the payment of taxes under the Tax Code. With respect to the payment of the corporate basic and additional residence taxes, it is believed that the corporation is subject to the full payment thereof for the reason that the graduated exemption from the payment of the taxes under Section 8(a) of Republic Act No. 5186 refers only to the taxes under the Tax Code. Since the basic and additional residence taxes are imposed by Commonwealth Act No. 465 and not under the Tax Code the corporation is subject to the full payment thereof. With regard to the payment of fixed taxes under Section 182 of the Tax Code, the corporation is entitled to the diminishing exemption provided in Section 8(a) of Republic Act No. 5186. Similarly, the corporation is also entitled to the diminishing exemption in the payment of documentary and science stamps on the shares of the stocks issued or to be issued. After the expiration of the graduated exemption rates in 1982, the sale of the activated carbon manufactured by your client shall be subject to the 7% sales tax prescribed in Section 186 of the Tax Code. However, its export sales of the same product shall remain exempt from the sales tax pursuant to Section 188 (e) of the same Code. The manufactured activated carbon does not come within the purview of agricultural products under Section 188 (b) of the same Code. The tax credit under Section 7(a) of Republic Act No. 6135 is an additional incentive granted to registered export producers. It is not conclusive as to exempt the company from the payment of the 7% sales tax. As the provisions of said section clearly states, the tax credit shall accrue to the registered export producer only after the other export producer or registered export trader has in fact exported the products of the export producer or those in the manufacture or processing of which the former were used. aisa dc Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue