BIR Ruling [DA-109-02]

June 7, 2002 BIR RULING [DA-109-02] RR 2-98 DA-189-2000 KEPCO Ilijan Corporation Suite 2501-A 25th Floor Tektite Tower I, Exchange Road Ortigas Centre, Pasig City Attention: Mr. Song, Chang-Hyun Treasurer Gentlemen : This refers to your letter dated May 30, 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 Ilijan Corporation (KEILCO) is a domestic corporation duly registered with the BOI as a pioneer enterprise with Certificate of Registration No. 98-010 issued on February 27, 1998; that KEILCO is the contractor of the 1200 MW Ilijan Natural Gas Power Plant Project under an Energy Conversion Agreement (ECA) it executed with the National Power Corporation (NPC) last November 15, 1997 pursuant to the Build-Operate-Transfer (BOT) Scheme; and 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 starting January 2002 or actual start of commercial operation whichever comes first but in no case earlier than the date of registration. Date of Filing: Within one (1) month from filing of the ITR with the BIR. 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, provides that 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 KEILCO 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 2% expanded creditable withholding tax prescribed in Revenue Regulations No. 2-98, as amended, for a period of six (6) years starting January, 2002. ( BIR Ruling No. DA-104-2002 dated May 31, 2002 ) However, any income, revenue and/or other receipts earned by KEILCO 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