BIR Ruling

April 26, 1974 Atty. Gelasio L. Dimaano 668 J. Wright Street San Juan, Rizal S i r : This refers to your letter dated April 2, 1974 requesting a ruling based on the following facts: "A corporation duly organized under the laws of the Philippines (Company XYZ) has been engaged for quite a long time in logging business. It has acquired almost 90% of the shareholdings of another corporation (Company ABC) which, for quite a long time also, has been engaged in the manufacture of veneer and plywood. In line with the policy of the Government of helping provide more labor locally and export finished or semi-processed products rather than raw materials only, Company XYZ plans to supply raw materials to Company ABC for processing into veneer and plywood. "Under the above relationship between companies XYZ and ABC, can the former Company be exempted from paying 7% percentage tax on raw materials supplied to Company ABC. If not, under what condition or status should Company ABC be in order that Company XYZ can be exempted from paying the percentage tax for raw materials delivered to Company ABC." In reply, I have the honor to inform you that the raw materials supplied by Company XYZ to Company ABC are subject to the 7% sales tax prescribed in Section 186 of the Tax Code. With regard to your other query, please be informed that as a matter of policy, this Office does not give advice on tax saving plans. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue TAN 1601-593-5