BIR Ruling [DA-090-04]

March 1, 2004 BIR RULING [DA-090-04] 57B DA-060-2002; 300-2003 Manila Water Company, Inc. MWSS Administration Building 489 Katipunan Road 1105 Balara, Quezon City Attention: Antonio T. Aquino President Gentlemen : This refers to your letter dated July 22, 2003, addressed to and referred by the Large Taxpayers Service Office, requesting for exemption from the provisions of Revenue Regulations No. 17-2003, particularly the withholding of 2% from water/sewer bills payment to Manila Water Co., Inc. (MWCI). Based on the representation made by MWCI and on the documents forwarded to this Office through the Large Taxpayers Service Office, MWCI is registered with the Board of Investments (BOI) as New Operator of Water Supply Distribution and Sewerage System for East Zone Service Area on Pioneer Status under the Omnibus Investments Code of 1987 (E.O. 226); that under its Certificate of Registration No. 97-188 dated August 20, 1997, MWCI was granted certain incentives, among others, an Income Tax Holiday (ITH) for six (6) years from August 1997 or from the actual start of its commercial operations; that on January 6, 1999, the BOI approved MWCI's request for the movement of the reckoning date of availment of its ITH from August 1, 1997 to August 2000; and that MWCI is now enjoying said ITH from August 1, 2000 until July 31, 2006. In reply, please be informed that Section 2.57.5(B)(2) of Revenue Regulations (Rev. Regs.) No. 2-98, as amended by Rev. Regs. No. 6-2001, and as further amended by Rev. Regs. No. 17-2003 implementing Section 57(B) of the Tax Code, provides that the withholding tax prescribed in the said Regulations shall not apply to income payments to persons enjoying exemption from income tax pursuant to the provisions of Republic Act No. 7916 and the Omnibus Investments Code of 1987. TAaEIc Considering therefore, that MWCI is a BOI-registered enterprise enjoying ITH for a period of six (6) years reckoned from August 1, 2000 or from the actual start of its commercial operation, pursuant to the provisions of Section 39(a)(1) of E.O. 226, this Office is of the opinion as it hereby holds that it is exempt from the payment of creditable withholding tax prescribed in Rev. Regs. No. 2-98, as amended by Rev. Regs. Nos. 6-2001 and. 17-2003 on income payments received by it during the ITH period, in connection with its registered activity. Consequently, as a supplier of services, MWCI is exempt from the provision of Section 3(M) of Rev. Regs. No. 17-2003 which imposes upon the top ten thousand (10,000) private corporations the duty to withhold an equivalent of two percent (2%) creditable withholding tax on their income payments to their supplier of services. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it shall be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group