BIR Ruling [DA-019-02]

February 12, 2002 BIR RULING [DA-019-02] 146-99 & DA-046-99 Clarion Manufacturing Corporation of the Philippines 3/F, Cacho Gonzales Building 101 Aguirre St., Legaspi Village Makati City Attention: Mr. Kuniaki Noya Accounting Department Manager Gentlemen : This refers to your letter dated August 10, 2001 requesting for a ruling that the tax exemption granted and enjoyed by Clarion Manufacturing Corporation of the Philippines (CMCP) as Philippine Economic Zone Authority (PEZA) registered enterprise includes, but is not limited to the documentary stamp tax, fire service tax and local government tax imposed by the insurance company. It is represented that CMCP is registered with PEZA under its Certificate of Registration No. 89-047 issued on October 15, 1989; that in accordance with its PEZA registration, CMCP commenced paying the 5% preferential gross income tax in 1995; and that its insurance company billed CMCP documentary stamp tax, fire service tax and local government tax for the following insured assets: 1) factory building; 2) machinery and equipment; 3) furniture and fixture; 4) transportation equipment; 5) cash on hand; 6) mold (die tools); and 7) stocks (finished goods, work in process, raw materials and factory supplies) In reply, please be informed that Section 24 of Republic Act No. 7916 provides, viz: "Sec. 24. Exemption from Taxes under the National Internal Revenue Code. Any provision of existing laws, rules and regulations to the contrary notwithstanding, no taxes, local and national, shall be imposed on business establishments operating within the ECOZONE. . . " In view of the foregoing, CMCP is exempt from the payment of documentary stamp tax on its insured assets. (BIR Ruling No. DA-046-99 dated January 25, 1999) However, Section 173 of the 1997 Tax Code, provides that "whenever one party to the taxable document enjoys exemption from the tax herein impose, the other party thereto who is not exempt shall be the one directly liable for the tax." Accordingly, since CMCP is exempt from the DST, the insurance company is the one directly liable for the tax. (BIR Ruling No. 146-99 dated September 14, 1999) It is not within the jurisdiction of this Office to rule on the exemption of CMCP with respect to local government and fire service taxes imposed on its insured assets. You may address your query to the Department of the Interior and Local Government-Finance, which has jurisdiction on the said matter. 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 as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal & Inspection Group