BIR Ruling [DA-105-05]

March 31, 2005 BIR RULING [DA-105-05] Section 57 & RR 1-2000 BIR Ruling No. 046-99 Hayakawa Component Technologies, Inc . Main Ave., Cavite Export Processing Zone Rosario, Cavite Attention: Mr. Mario Ponce de Leon Treasurer Gentlemen : This refers to your letter dated November 18, 2004 requesting for exemption from payment of creditable withholding tax on income payments to Hayakawa Component Technologies, Inc. (HCTI). It is represented that HCTI is a PEZA-registered company under PEZA Registration No. 97-048 dated July 3, 1997; that its registered activity is to manufacture automatic document feeder (ADF) and assembly of noise filters, panel board, ADF control board and photo density sensor and assembly of finisher/sorter for photocopying machines; that it started its commercial operation on July 10, 1997; and that starting on July 1, 2003, upon the expiration of its income tax holiday, it adopted the preferential gross income tax rate of 5% in lieu of all taxes pursuant to the provisions of Republic Act (R.A.) No. 7916 or R.A. No. 8748, as amended. In support of your request you submitted a photocopy of the following documents: 1) PEZA Certificate of Registration; 2) BIR Certificate of Registration; 3) SEC Registration; 4) Articles of Incorporation and By-laws; and 5) Certificate of Start of Commercial Operation; In reply, please be informed that under Section 5 of Revenue Regulations No. 1-2000, dated November 12, 1999, the total amount representing 5% of the gross income earnings by all registered enterprises from the operation of their business activities inside, among others, Special Economic Zones under PEZA shall be paid to any accredited bank within the Revenue District Office having jurisdiction over the respective ECOZONES on or before the 15th day of the fourth month following the close of the taxable year, whether calendar or fiscal year accounting period, in accordance with Title II, Chapter XII, of the Tax Code of 1997. CHcESa Accordingly, since HCTI is exempt from payment of national and local taxes, in lieu of which, it is subject to the 5% tax based on the gross income earned as defined in Sec. 24 of R.A. No. 7916, as amended by R.A. No. 8748, it is therefore, exempt from the creditable expanded withholding tax pursuant to Section 2.57.5(B) of Revenue Regulations No. 2-98, as amended, implementing Section 57(B) of the Tax Code of 1997 (BIR Ruling No. DA-046-99 dated January 25, 1999). This ruling is 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 from the date of issuance. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group