BIR Ruling [DA-089-05]

March 14, 2005 BIR RULING [DA-089-05] R.R. 2-98 DA-094-2003 dtd 3/26/03 Digitel Mobile Philippines Inc . (SUNCELLULAR) Level 11 Galleria Corporate Center EDSA cor. Ortigas Ave., Quezon City Attention: Atty. William S. Pamintuan Senior Vice President Legal Services Gentlemen : This refers to your request for a confirmatory ruling that the income payments to Digitel Mobile Philippines, Inc. (DMPI) is not subject to creditable withholding tax pursuant to Section 2.57.5(B)(2) of Revenue Regulations 2-98, as amended. It is represented that DMPI is a corporation organized and existing under the laws of the Philippines; that it is licensed to construct, install, establish, operate and maintain telecommunications systems throughout the Philippines; that it is registered with the Board of Investments with Certificate of Registration No. 2001-123, as amended; that it is a pioneer industry; that as such, DMPI is currently enjoying Income Tax Holiday from January 2003 to December 2008. In reply, please be informed that Section 2.57.5(B) of Revenue Regulations No. 2-98 is explicit in its provisions that the expanded withholding tax does not apply to income payments to persons enjoying exemption from the payment of income taxes pursuant to the provisions of any law, general or special. BOI-registered enterprises enjoy exemption from payment of income taxes pursuant to the provisions of Section 39(a)(1) of the Omnibus Investments Code of 1987, such as the income tax holiday. Such being the case, DMPI being a BOI registered enterprise enjoying income tax holiday under a special law is exempt from the 2% withholding tax on income payments it received from its customers whether ECOZONE registered or customs territory enterprises. (BIR Ruling DA 381-2000 dated November 7, 2000) 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 null and void. cTCEIS Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group