BIR Ruling [DA-087-01]

May 16, 2001 BIR RULING [DA-087-01] RR. 2-98 DA-393-2000 Solid State Holdings & Multi-Resources Corp. Gabriel Industrial Complex Cavite Export Processing Zone Rosario Cavite Attention: Mr . Josefino Punzalan General Manager Gentlemen : This refers to you letter dated January 15, 2001 requesting for a Certificate of Exemption from Withholding Tax. It is represented that your company, Solid State Holdings & Multi-Resources Corporation with Securities and Exchange Commission Registration No. 189717 dated November 28, 2000, is registered with the Philippine Economic Zone Authority on July 3, 1996 as an Ecozone Facilities Enterprise under Certificate of Registration No. 96-09, to engage in the construction of factory buildings for lease to registered Ecozone enterprises at the Cavite Economic Zone (CEZ), Rosario, Cavite. In reply, please be informed that Section 24 of Republic Act No. 7916 provides: "SEC. 24. Exemption from Taxes under the National Internal Revenue Code Any provision of existing laws, rules and regulations to the contrary notwithstanding, no taxes, local and national, shall be imposed on business establishments operating within the ECOZONE. In lieu of paying taxes, five percent (5%) of the gross income earned by all businesses and enterprise within the ECOZONE shall be remitted to the national government. This five percent (5%) shall be shared and distributed as follows: "(a) Three percent (3%) to the national government; "(b) One percent (1%) to the local government units affected by the declaration of the ECOZONE in proportion to their population, land area, and equal sharing factors; and "(c) One percent (1%) for the establishment of a development fund to be utilized for the development of municipalities outside and contiguous to each ECOZONE: . . ." Thus, as a PEZA registered business establishment operating within the ECOZONE, Solid State Holdings & Multi-Resources Corporation shall, in lieu of paying local and national taxes, be subject to the payment of preferential tax rate of 5% based on its gross income earned within the ECOZONE which shall be remitted in accordance with Republic Act No. 8748. Accordingly, since you are exempt from payment of national and local taxes, and in lieu of which, you are subject to the 5% tax based on the gross income earned as defined under Revenue Regulations No. 12-97, and as further amended by Revenue Regulations No. 1-2000, this Office is of the opinion as it hereby holds that you are exempt from the creditable withholding tax imposed under Section 2.57.5(B) of Revenue Regulations No. 2-98, implementing Section 57(B) of the Tax Code of 1997 on income payments received by your company from the lease of your factory buildings to registered Ecozone enterprises at the Cavite Economic Zone (CEZ). (BIR Ruling No. 163-94 dated December 2, 1994 and BIR Ruling No. DA-263-98 dated June 23, 1998). This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal and Inspection Group