Asiatic Development Corporation

February 1, 2008 BIR RULING [DA-070-08] 57 (B), 196, 106; DA-056-2003 Asiatic Development Corporation Asiatic Bldg., Phoenix Sun Business Park E. Rodriguez, Jr. Avenue Libis, Quezon City Attention: Mr. Emiliano C. Estrella SVP-Comptroller Gentlemen : This refers to your letter dated June 4, 2007 requesting for a ruling on the tax consequence of the Income Tax Holiday (ITH) granted to Asiatic Development Corporation (Asiatic for brevity) by the Board of Investments (BOI) under Executive Order (EO) No. 226 otherwise known as the Omnibus Investments Code of 1987, for a period of four (4) years from start of commercial operations/selling. It appears that Asiatic is a real estate developer and is registered with the BOI as a New Developer of Mass Housing Projects on a Non-Pioneer status. It is the developer of the following mass housing projects, namely: Project Location No. of Economic Date of BOI Registration Housing Units Registration No. Bay Garden Sto. Domingo, 1,018 May 24, 2005 2005-007 Homes Bay, Laguna Tierra Vista Malagasang II, 191 May 29, 2006 2006-075 Homes Imus, Cavite Pursuant to the Specific Terms and Conditions of its Certificate of Registration for Bay Garden Homes, Asiatic is entitled to an ITH for a period of 4 years from January 2005, and for Tierra Vista Homes, it was granted a 4 year ITH from June 2006 or both from the actual start of commercial operations/selling, whichever is earlier, but in no case earlier than their dates of registration. aHTEIA Its housing units shall be marketed and sold mainly through the Home Development Mutual Fund (HDMF) or PAG-IBIG Fund, the Government Service Insurance System (GSIS) or through banks with a term range of 5 to 10 years to pay and up to 30 years for PAG-IBIG. During the 4-year period, it will receive the full payment of the housing units from the financing institutions and must recognize the sale in its books to avail of the tax holiday granted by the BOI. In reply, please be informed that under Section 2.57.5 (B) (2) of Revenue Regulations (RR) No. 2-98, implementing Section 57 (B) of the Tax Code of 1997, the withholding tax prescribed in the said Regulations shall not apply to income payments to persons enjoying exemption from the income tax provided by Republic Act No. 7916 and the Omnibus Investments Code of 1987. (BIR Ruling No. DA-072-98 dated March 11, 1998) Accordingly, since Asiatic is a BOI-registered enterprise, enjoying exemption from payment of income taxes pursuant to the provisions of Section 39 (a) (1) of the Omnibus Investments Code of 1987 for a period of 4 years from January 2005, in the case of Bay Garden Homes and from June 2006 for Tierra Vista Homes or both from the actual start of commercial operations/selling, whichever is earlier, but in no case earlier than their dates of registration, this Office hereby holds, that Asiatic is exempt from the payment of the creditable withholding tax imposed under Revenue Regulations No. 2-98, on income payments received by it during the aforementioned period with respect to its registered activity, subject however to the condition that both the BOI General and Specific Terms and Conditions for the grant of ITH are met during the said period. In addition, ITH is an exemption from income tax on income payments received by a company for the duration of the period thus indicated in the Terms and Conditions of the Certificate of Registration. Documentary stamp tax is not a tax on income but is in the nature of an "excise tax" ( CIR vs. Herald Lumber Co. , 10 SCRA 372) imposed either upon the transaction or document. In view of the fact, that Asiatic enjoys an ITH at the time of its sales transaction, it is therefore exempt only from income tax but not from documentary stamp tax though its transaction refers to any of its registered activity. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered as null and void. TCASIH Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service