BIR Ruling

June 18, 1969 Messrs. Sycip, Gorres, Velayo & Co. Certified Public Accountants P.O. Box 589, Manila Gentlemen : This refers to your letter dated February 1, 1969 requesting a reconsideration of our demand from your client, USI Philippines, Inc., for the payment of the remaining difference of 5% withholding tax on dividends remitted by the same to US Industries, Inc., New York on September 12, 1968 plus the statutory penalties incident to delinquency. cdta In said letter, you disagree with our view on the effectivity of Republic Act No. 5431 (not 5423) with respect to non-resident foreign corporations filing income tax returns on the calendar year basis. You contend that inasmuch as the provision of Section 10 of the Act uses the phrase "taxable years beginning after June 30, 1968" and not "income earned beginning after June 30, 1968", as interpreted by this Office, its effectivity for the purpose of implementing its provisions shall commence after December 31, 1968; in other words, the increased rate of corporate tax shall apply to income earned starting January 1, 1969, citing the statement made by Senate Lagumbay during a discussion of the House Bill No. 14543, now Republic Act No. 5431, with Senator Almendras. In bringing up this discussions between Senators Lagumbay and Almendras on the consideration of House of Bill No. 14543 (Congressional Records of the Senate, Vol. III, No. 25, February 28, 1968) you overlook the fact that this particular statement of Senator Lagumbay was in retort to a question of Senator Almendras, the pertinent portion of which is quoted hereunder: "Now, my last question, Mr. President, refers to Section 4 on Page 8. 'Section 4. The provisions of this Act shall apply only to taxable years beginning after Dec. 31, 1968'. What do you mean by 'taxable years'." It will be observed that before House Bill No. 14543 was enacted into a law (RA 5431) the date of effectivity provided there (in H.B. No. 14543) was "beginning after December 31, 1968". Under such provision, the effectivity of the law for the purpose of implementing its provisions would have commenced on January 1, 1969. However, this particular provision of Section 4 of H.B. No. 14543 was not carried in toto in the actual enactment of Republic Act No. 5431 a change was made in that, the provision is now worded, thus, "The provisions of this Act shall apply to income from taxable years beginning after June 30, 1968". Consequently, its effectivity for the purpose of implementing its provisions commenced on July 1, 1968. In view of the foregoing considerations, it is requested that you advise your client, USI Philippines, Inc., to pay the aforesaid remaining withholding tax on dividends remitted by the same to U.S. Industries, Inc., New York plus the statutory penalties incident to delinquency. aisadc Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue