BIR Ruling [DA-090-99]

February 15, 1999 BIR RULING [DA-090-99] Joaquin Cunanan & Company 14/F, Multinational Bacorporation Centre 6805 Ayala Avenue Makati City Attention: Atty . George T . J . Lavadia Principal Tax and Corporate Services Gentlemen : This refers to your letter dated May 7, 1998 requesting on behalf of your client, Jardine Schindler Corporation (JSEC) , for exemption from the payment of the expanded withholding tax for the taxable year 1998 on the ground that said corporation has incurred operational losses in the years 1996 and 1997 pursuant to Revenue Regulations No. 12-94, amending Revenue Regulations No. 6-85. It is represented that JSEC is a corporation organized and existing under Philippine law; and that based on the documents submitted to this Office, the same show that during the calendar years ending December 31, 1996 and December 31, 1997, it incurred net operating losses in the amounts of P9,798,380.00 and P31,489,713.00, respectively. In reply, please be informed that Section 3 of Revenue Regulations No. 12-94, amending Sec. 4 of Revenue Regulations No. 6-85, otherwise known as the "Expanded Withholding Tax Regulations," provides that "SEC. 3. Section 4 of Revenue Regulations No. 6-85 is hereby amended to read as follows: 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 It is emphasized herein that the aforesaid exemption from the creditable withholding tax is no longer included under Section 2.57.5 of Revenue Regulations No. 2-98, the new regulations relative to the Withholding on Income subject to the Expanded Withholding Tax and Final Withholding Tax, Withholding of Creditable Value-Added Tax and Other Percentage Taxes. However, Revenue Regulations No. 2-98 was published in the newspapers on May 9, 1998 and took effect fifteen (15) days thereafter or on May 24, 1998. Hence, all applications for exemption from the creditable withholding tax based on the "2-year operating loss" filed with this Office on or before May 24, 1998 are still covered by Revenue Regulations No. 12-94. Such being the case, and since your client has incurred net operating losses for two (2) consecutive years in 1996 and 1997, it is exempt from the creditable withholding tax prescribed under Revenue Regulations No. 6-85, as amended by Revenue Regulations No. 12-94, for the year 1998. (BIR Ruling No. DA-497-98 dated November 16, 1998) LLpr This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, the facts would turn out to be different, then this ruling shall not apply and/or considered null and void. (BIR Ruling No. DA-497-98 dated November 16, 1998) Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)