BIR Ruling [DA-133-05]

April 6, 2005 BIR RULING [DA-133-05] Section 57 (B) BIR Ruling No. DA-046-99 Goulds Pumps (NY), Inc . 12 Ring Road, LISP II Calamba, Laguna Attention: Ms. Rhealyn U. Almendral Senior Accounting Clerk Gentlemen : This refers to your letter dated January 6, 2005 requesting for a ruling that Goulds Pumps (NY), Inc., Philippine Branch (GPIPB) is entitled to 5% special tax on gross income in lieu of all national and local taxes. It is represented that GPIPB is a PEZA registered company with PEZA Registration Certificate No. 97-033 dated April 21, 1997, engaged in the manufacture/assembly of various pumps and other related products; that its plant and office are located at Ring Road, Light Industry and Science Park II, Calamba, Laguna; that its income tax holiday entitlement lapsed last June 2001; and that on December 14, 2004, PEZA certified that GPIPB is entitled to the 5% special tax on gross income under Section 24 of Republic Act (R.A.) No. 7916, as amended by R.A. No. 8748 upon expiry of its income tax holiday entitlement. In reply, please be informed that under Section 5 of Revenue Regulations (Rev. Regs.) No. 1-2000, dated November 12, 1999 (as amended by Rev. Regs. No. 2-2005), 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. Furthermore, pursuant to then Section 4(b)(2) of Rev. Regs. No. 6-85, as amended by Rev. Regs. No. 12-94 and as further amended by Section 2.57.5(B) of Rev. Regs. No. 2-98, as amended, the withholding taxes therein prescribed shall not apply to income payments to persons enjoying exemption from payment of the income taxes. SHECcD Accordingly, GPIPB 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 Revenue Regulations No. 1-2000, and 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. This ruling is being 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 as null and void. Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group