BIR Ruling [DA-080-96]

February 21, 1996 BIR RULING [DA-080-96] San Miguel Corporation 40 San Miguel Avenue Mandaluyong City Attention: Mr . Jose S . Tayag, Jr . VP and Manager, Tax Department Gentlemen : This refers to your letter dated December 5, 1995 requesting exemption from payment of the withholding tax on income payments to be made to one of your subsidiaries, Magnolia-Nestle Corporation, pursuant to Revenue Regulations No. 6-85, as amended by Revenue Regulations No. 12-94. It is represented that Magnolia-Nestle Corporation (MNC) is a domestic corporation engaged in the manufacture and sale of various ice cream products; and that for the past two (2) years (1993 and 1994), MNC has been incurring net operating losses on its business operations in the amounts of P24,556,772.00 and 169,802,665.00 respectively as evidence by its duly audited financial statements and income tax returns. cdtech In reply, please be informed that Section 4(d) of Revenue Regulations No. 6-85, as amended by Revenue Regulations No. 12-94, otherwise known as the "Expanded Withholding Tax Regulations" provides that "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 a payee who suffered net operating losses during the immediately preceding two (2) years; xxx xxx xxx Such being the case, since MNC suffered net operating losses during the immediately preceding two (2) tax years, 1993 and 1994, this Office is of the opinion as it hereby holds that income payments to be made to MNC are exempt from the creditable expanded withholding tax (BIR Ruling No. 126-94 dated August 15, 1994). This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, the facts turn out to be different, then this ruling shall be considered null and void. cd Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)