BIR Ruling [DA-048-97]

January 30, 1997 BIR RULING [DA-048-97] Sycip Gorres Velayo & Co. 6760 Ayala Avenue Makati City Attention: E . C. Alcantara Tax Division Gentlemen : This refers to your letter dated June 19, 1996, requesting confirmation of your opinion that your client, Science Park of the Philippines, Inc., ("SPPI") is not subject to the expanded withholding tax on the sale of industrial lots, effective December 29, 1995, by virtue of its income tax holiday incentive arising from its registration on the same date with the Board of Investments (BOI) as an expanding operator of an industrial estate. aisadc It is represented that in September, 1995, SPPI applied with the BOI for the registration of its expanded activity of selling industrial lots located within the Light Industry and Science Park in Cabuyao, Laguna; that the said application was approved by the BOI Board on October 6, 1995; that among the incentives granted to SPPI is the income tax holiday for a period of three (3) years from date of registration or actual commencement of commercial operation; that as a condition precedent for the issuance of a Certificate of Registration, the BOI required that SPPI formally accept all the terms and conditions enumerated in their letter of approval, among which is a base figure for purposes of computing the income tax holiday; that since a base figure is applicable only to manufacturing concerns and not to operators of industrial parks, SPPI, requested for the deletion of this base figure; that on November 29, 1995, the board of directors of SPPI formally accepted the terms and conditions of registration, subject to the requested deletion of the base figure; that on December 29, 1995, the Housing and Land Use Regulatory Board (HLURB") issued to SPPI its License to Sell, and on the same date, SPPI did sell five of its lots to five different industrial corporations; that Certificate of Registration No. 95-280 was then issued to SPPI on January 25, 1996, with the base figure deleted from the terms and conditions that the registration date was subsequently amended by the BOI from January 25, 1996 to December 29, 1995 to coincide with the date of its HLURB license; and that this change was duly annotated on SPPI's registration certificate. In reply thereto, please be informed that your opinion is hereby confirmed. Paragraph 6 (a) of the specific terms and conditions of registration states that: "6. The enterprise shall be entitled to the following incentives under E.O. 226 as amended by RA 7918: a. Income tax holiday for three (3) years for the 65 hectares of land covered by the following T.C.T. Nos. reckoned from July 1996 or actual start of commercial operations, whichever comes first, but not earlier than the date of registration ; . . ." The date of registration and start of commercial operation of SPPI being both on December 29, 1995, its entitlement to the income tax holiday starts on that date. Notwithstanding that the date of the registration certificate is January 25, 1996, the fact that it was subsequently amended to December 29, 1995, as shown by the annotation on the registration certificate itself, makes it clear that the intent of the BOI was to make the income tax holiday applicable to SPPI as of December 29, 1995. This is expressly provided for by Section 1(r) of the Rules & Regulations implementing E.O. 226, which states that the date of registration shall be the date when the certificate is issued, unless an earlier date is indicated as the registration date . This is further confirmed by the BOI letter of April 16, 1996 amending the registration date from January 25, 1996 to December 29, 1995, which declared that this change posed no serious effects on the registration terms and conditions and incentives availment. Therefore, any liability for income tax as a result of the December 29, 1995 sale of industrial lots, falls within the income tax holiday incentive granted to SPPI by the BOI. Based on the foregoing, this Office is of the opinion that SPPI is not subject to income tax, and consequently to the expanded withholding tax on sale of industrial lots effective December 29, 1995, by virtue of its income tax holiday incentive arising from its registration on the same date with the Board of Investments as an expanding operator of an industrial estate. (BIR Ruling No. 207-91 dated October 9, 1991; BIR Ruling No. 061-94 dated February 11, 1994) This ruling is being issued on the basis of the 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. cdtech Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service) By: ALICIA L. TOMACRUZ Head Revenue Executive Assistant (Legal Service)