BIR Ruling [DA-104-02]

May 31, 2002 BIR RULING [DA-104-02] RR 2-98 DA-189-2000 KEPCO Philippines Corporation Suite 2501-A 25th Floor Tektite Tower I, Exchange Road Ortigas Centre, Pasig City Attention: Mr. Song, Chang-Hyun General Manager Gentlemen : This refers to your letter dated May 15, 2002 requesting for a Certificate of Exemption from the payment of creditable expanded withholding tax prescribed under Revenue Regulations No. 2-98, as amended on account of your registration with the Board of Investments (BOI) under Executive Order No. 226, otherwise known as the "Omnibus Investments Code of 1987." It is represented that KEPCO Philippines Corporation (KEPHILCO) is a domestic corporation duly registered with the BOI as a pioneer enterprise with Certificate of Registration No. 95-205 issued on November 15, 1995; that KEPHILCO is engaged in the rehabilitation, operation and maintenance of the 650 MW Malaya Thermal Power Plant located in Pililia, Rizal pursuant to a Rehabilitation Operation Maintenance and Management (ROMM) Agreement with the National Power Corporation (NPC); that you are entitled to an Income Tax Holiday for six (6) years pursuant to No. 6(a) of the Specific Terms and Conditions accompanying your Certificate of Registration, viz: "6. The enterprise shall be entitled to the following incentives: a. Income Tax Holiday for six (6) years from September 14, 1998, the date of turnover by NPC or actual start of commercial operation whichever comes first but not earlier than the date of registration. Date of Filing: Within one (1) month from filing of the ITR with the BIR. and that as stated in the letter of Ms. Angelica M. Cayas, OIC-Director, Incentives Department, BOI, to Mr. Pio J. Benavides, Vice-President, GENCO I, National Power Corporation, the reckoning date of the six (6) years income tax holiday of KEPHILCO is June 8, 1998 which corresponds to the date of its actual start of operation and completion of the 650 MW Malaya Thermal Plant. In reply, please be informed that Section 2.57.5(B)(2) of Revenue Regulations No. 2-98, as amended, implementing Section 57(B) of the Tax Code of 1997, the withholding tax prescribed in the said Regulations shall not apply to income payments made to persons enjoying exemption from payment of income taxes pursuant to the provisions of any law (general or special) like the Omnibus Investments Code of 1987. Accordingly, since KEPHILCO is a BOI-registered enterprise enjoying exemption from payment of income taxes pursuant to the provisions of Section 39(a)(1) of the Omnibus Investments Code of 1987, income payments made to it in respect to its registered activity shall not be subject to 1% (now 2%) expanded creditable withholding tax prescribed in Revenue Regulations No. 2-98, as amended, for a period of six (6) years from June 8, 1998. (BIR Ruling No. DA-189-2000 dated March 30, 2000) However, any income, revenue and/or other receipts earned by KEPHILCO prior to the reckoning date of its ITH shall be subject to income and other applicable taxes, the same not being covered by the said ITH. 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, Commissioner of Internal Revenue By: (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal and Inspection Group