8990 Housing Development Corporation

January 11, 2007 BIR RULING [DA-011-07] R.R. 2-98; DA-578-2006 8990 Housing Development Corporation Room 200 Rivergate Commercial Complex Gen. Maxilom Avenue Cebu City Attention: Mr. Jesus B. Atencio President Gentlemen : This refers to your letter dated December 19, 2006 requesting exemption from the payment of the creditable withholding tax. It is represented that 8990 Housing Development Corporation (HDC) is a mass housing developer with existing projects in the cities of Lapu-Lapu, Cebu, Minglanilla, Davao and Naga; that last year, it was able to secure accreditation with the Board of Investments (BOI) under the Investments Priorities Plan (IPP) that provides among others, an income tax holiday for a limited time of its projects, to wit: "5. The firm shall be entitled to the following incentives: a. Income Tax Holiday (ITH) for a period of four (4) years from March 2006 or actual start of commercial operations/selling, whichever is earlier, but in no case earlier than the date of registration. The ITH shall be limited only to the revenue generated from this registered activity (Deca Homes Davao Phase 1 Barangay Cabantian, Buhangin, Davao City). "In the availment of ITH, the firm shall secure endorsement/certification from the HLURB that it has faithfully complied with the approved development plan. Date of filing : An application shall be filed with the BOI Incentives Department within one (1) month from the filing of the final ITR in order to validate claim for income tax exemption. The application shall be accompanied by a certification by SSS that the firm is in good standing in the remittance of SSS contribution of its employees. Any request for extension of the reckoning date of ITH availment shall be filed prior to the scheduled date of within 90 days from the occurrence of fortuitous events and/or government delays." that since HDC does significant business with the Home Development Mutual Fund (HDMF), the latter required HDC to submit a certification from the BIR recognizing its tax exemption status, particularly as it pertains to the exemption from the payment of creditable withholding taxes, which is a natural consequence of the BOI income tax holiday; and that HDC requested said certification from the local BIR Office in Cebu City but instead it was directed to officially write BIR Head Office in Metro Manila for certification. In reply, please be informed that Section 2.57.5 (B) (2) of Revenue Regulations (RR) No. 2-98, as last amended by RR 30-2003, implementing Section 57 (B) of the Tax Code of 1997, as amended by Republic Act (RA) No. 9337, provides that the withholding tax prescribed in the said regulations shall not apply to income payments to persons enjoying exemption from income tax pursuant to the provisions of R.A. No. 7916 and the Omnibus Investment Code of 1987. Considering therefore, that 8990 Housing Development Corporation is a BOI-registered enterprise enjoying ITH for a period of four (4) years reckoned pursuant to the provisions of Section 39 (a) (1) of Executive Order No. 226, i.e., from March 2006 or actual start of commercial operations/selling, whichever is earlier, but in no case earlier than the date of registration, this Office is of the opinion as it hereby holds that it is exempt from the payment of creditable withholding tax prescribed in RR No. 2-98, as last amended by RR No. 30-2003 on income payments received by it during the bonus year ITH, in connection with its registered activity. HDATSI Consequently, as a supplier of services, 8990 Housing Development Corporation is exempt from the provision of Section 3 (M) of RR No. 17-2003, as amended, which imposes upon the top ten thousand (10,000) private corporations the duty to withhold an equivalent of two (2%) percent creditable withholding tax on their income payments to their supplier of services. (BIR Ruling No. DA-578-2006 dated September 22, 2006) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service