BIR Ruling [DA-046-99]

January 25, 1999 BIR RULING [DA-046-99] GRM Ecozone Storage, Inc. Unit P, Q, & R Columbia Complex Bldg. 707 Ninoy Aquino Avenue Paraaque, Metro Manila Attention: Mr . Rodrigo A . Anabu Director Gentlemen : This refers to-your letter dated April 17, 1998 requesting exemption from the creditable expanded withholding tax. It is resented that GRM Ecozone Storage, Inc. (GRM) was granted PEZA Certificate of Registration No. 97-008F dated August 21, 1997 as an ECOZONE Facilities Enterprise engaged in the establishment of warehousing and storage facilities for the production materials and supplies of Intel Technology, Inc. at the Gateway Business Park Special Ecozone; that PEZA Board Resolution No. 97-165 dated May 14, 1997 amended PEZA Board Resolution No. 97-054 dated February 26, 1997 allowing GRM to serve the needs of other Ecozone Export Enterprises at the Gateway SEZ; that among the special conditions set forth in the Registration Agreement made and entered into by and between PEZA and GRM, the latter's exemption from national and local taxes in lieu of paying the 5% tax on gross income was duly reiterated; and that it is GRM's contention that as a consequence of its tax exemption from all taxes in lieu of the 5% tax on gross income, it is exempt from the creditable withholding tax. Hence, this request. In reply, please be informed that pursuant to Section 4 of Revenue Regulations No. 12-97 dated August 7, 1997, the total amount representing 5% of the gross income earnings by all registered enterprises from the operation of their business activities inside, among others, Special Economic Zones under PEZA shall be paid to any accredited bank within the Revenue District Office having jurisdiction over the respective ECOZONES on or before the 15th day of the fourth month following the close of the taxable year. The above-mentioned Revenue Regulations clearly states that the amount equal to five percent (5%) of the gross income shall be remitted and paid on or before the 15th day of the fourth month following the close of the taxable year. Impliedly, the 5% portion shall be determined only at the close of the taxable year. However, the above provision shall not affect the time for filing of the quarterly and final or adjustment returns as provided for under Section 7(c) of Revenue Regulations No. 1-95. Furthermore, pursuant to then Section 4(b)(2) of the Revenue Regulations No. 6-85, as amended by Revenue Regulations 12-94 and as further amended by Section 2.57.5(B) of Revenue Regulations No. 2-98, the withholding taxes therein prescribed shall not apply to income payments to persons enjoying exemption from payment of the income taxes. Accordingly, since GRM Ecozone Storage, Inc. is exempt from payment of national and local taxes; in lieu of which, it is subject to the 5% tax based on the gross income earned as defined in Rev. Regs. No. 1-95, as amended by Rev. Regs. No. 12-97, it is therefore, exempt from the creditable expanded withholding tax pursuant to Section 2.57.5(B) of Revenue Regulations No. 2-98, implementing Sec. 57(B) of the Tax Code of 1997. (BIR Ruling No. 163-94) 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, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)