Jamecca Insurance Agents, Inc.

January 25, 2007 BIR RULING [DA-037-07] R.A. 7227; No. 006-2002; DA-526-2006; VAT Ruling No. 006-2004 Jamecca Insurance Agents, Inc . Unit 119, Alpha Building Subic International Hotel Rizal Highway, CBD, SBFZ 2222 Attention: Mr. Jorge B. Aquino President Gentlemen : This refers to your letter dated December 19, 2006 requesting for confirmation of your opinion that Jamecca Insurance Agents, Inc. ("Jamecca"), being an SBFZ-registered enterprise, is subject to the 5% preferential tax rate pursuant to Section 12 (c) of R.A. No. 7227 and shall be exempt from expanded withholding taxes pursuant to Section 2.57.5 of Revenue Regulations No. 2-98, as amended, and from the value-added tax for services rendered as an agent of insurance companies within SBFZ. It is represented that Jamecca Insurance Agents, Inc. is engaged in insurance business acting as agent for insurers under SEC Certificate of Registration No. CS200604851 dated June 22, 2006; that it is located within the Subic Bay Freeport and Economic Zone and duly accredited by SBMA as evidenced by Certificate of Registration and Tax Exemption No. 2006-0035 issued on October 10, 2006; and that it is subject to the 5% preferential tax rate, in lieu of paying all national and local taxes. In reply, please be informed that pursuant to Section 12 (c) of R.A. No. 7227, Subic Bay Freeport (SBF) registered enterprises shall be exempt from all national and local taxes in lieu of paying the preferential tax of five percent (5%) of the gross income earned. The phrase "in lieu of paying local and national taxes" has been interpreted in numerous rulings to include exemption from the payment of creditable withholding tax and other business taxes like VAT, percentage tax, excise tax and customs and import duties. (BIR Ruling No. DA-526-2006 dated August 31, 2006) Section 3 (o) of Revenue Regulations (RR) No. 1-95, as amended by RR No. 12-97 provides that "gross income" refers to gross sales or gross revenues derived from the registered business activity within the ECOZONE, net of sales discounts, sales returns and allowances and minus cost of sales, cost of production or direct costs of services but before any deduction for selling and administrative expenses or incidental losses during a given taxable period. Such being the case, the gross income earned on the services rendered by Jamecca to its clients inside the Subic Bay Freeport and Economic Zone is subject to the 5% preferential tax rate. Furthermore, as a duly registered SBF-enterprise, Jamecca is exempt from the value added tax on the sale of its services to clients also located inside the Freeport Zone pursuant to Section 109 (K) of Republic Act No. 9337. (VAT Ruling No. 006-2004 dated April 2, 2004) EHDCAI This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it shall 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