BIR Ruling [DA-023-98]

January 29, 1998 BIR RULING [DA-023-98] Tri-Union Industrial Corporation P. O. Box 1384 M a n i l a Attention: Mr . Guiller E . Tumangan Gentlemen : This refers to your letter dated January 23, 1998 requesting for an exemption from the payment of 7.5% expanded withholding tax on the sale of your real properties and equipment located at Cabuyao, Laguna. LexLib It is represented that Tri-Union Industrial Corporation is a domestic corporation incorporated in August 1977 and is engaged in the manufacture of textile products; that during the last preceding two (2) taxable years, it has suffered tremendous losses from its business operations as evidenced by its duly audited financial statements and income tax returns, viz: Year Losses 1995 P43,243,753 1996 P79,577,098 that as a result thereof, the company has stopped its manufacturing operations effective March 17, 1997 pursuant to a resolution during a meeting of the stockholders held on January 23, 1997; and that in order to meet its outstanding obligations to creditors and the separation/financial assistance to its employees, the company decided to sell its real properties covered by TCT Nos. 353378 and 353379 and its equipment, which are mortgaged with several banks. In reply, please be informed that Section 3 of Revenue Regulations No. 12-94, amending Revenue Regulations No. 6-85, otherwise known as the "Expanded Withholding Tax Regulations", provides as follows: "SEC. 3. Section 4 of Revenue Regulations No. 6-85 is hereby amended to read as follows: "SEC. 4. Exemption from Withholding . The withholding of tax prescribed in these Regulations shall not apply to income payments in the following cases: "xxx xxx xxx "(d) In the case of payee who suffered net operating losses during the immediately preceding two (2) tax years;" "xxx xxx xxx" ( Emphasis supplied .) In view thereof and considering that your company suffered net operating losses during the immediately preceding two (2) taxable years, i.e., 1995 and 1996, this Office is of the opinion that the payments for the sale of your real properties covered by TCT Nos. 353378 and 353379 located in Cabuyao, Laguna and your equipment (presumably intended for your industry or works or which tend directly to meet the needs of your industry or work or attached to your land or building/s in a fixed manner, in such a way that the same cannot be separated therefrom without breaking the material or deteriorating the object) are exempt from the 7.5% creditable expanded withholding tax pursuant to Sec. 4 of Revenue Regulations No. 6-85, as amended by Rev. Regs. No. 12-94. (BIR Ruling No. DA 232-97 dated July 8, 1997). If the said equipment, however, is movable, and not intended for the purpose/s as mentioned above, the same is not also subject to the expanded withholding tax considering that only payments enumerated under Rev. Regs. No. 6-85, as amended, are subject to the expanded withholding tax and payments for the sale of such equipment are not among those specified in the said Regulations. (BIR Ruling No. 61-97 dated May 15, 1997). This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, the facts as represented would turn out to be different, this ruling shall then be considered null and void. LLjur Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal & Enforcement Group