BIR Ruling [DA-156-04]

April 1, 2004 BIR RULING [DA-156-04] 57 (B); 114 (C) DA-444-03 Hanjin Heavy Industries & Construction Co.,Ltd. 2nd Floor, Eurovilla Condominium I Cor. Herrera & Legaspi Streets Legaspi Village, Makati City Attention: Mr. Tim A. Acedo, Ph.d.,CPA Consultant Gentlemen : This refers to your letter dated February 17, 2004 requesting clarification regarding the Loan Agreement No. PH 202, Bohol Irrigation Project, that only Japanese Companies operating as Suppliers, Contractors and Consultant will not be subjected to deduction of taxes. It is represented that BIR Ruling No. DA-444-2003 dated December 5, 2003 has been issued in your favor; that the NIA Administrator would like to be sure that his actions are sanctioned by legal opinion and ruling; that the NIA Administrator seems to agree that the loan is not dependent upon the nationality of the project contractor but he is also quite disturb about the last paragraph of the aforesaid ruling which states "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 null and void." In reply, please be informed that the less general interpretations of tax laws at the administrative level, called "rulings," are usually rendered on request of taxpayers to clarify certain provisions of a tax law and the same are being issued on the basis of the documents submitted viz-a-viz the provisions of the law. BIR Ruling No. DA-444-2003 dated December 5, 2003 was issued on the presumption that the documents submitted to this Office are true and correct. Thus, the collatilla " 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 null and void " was appended thereto reflecting the reservation of the Bureau of Internal Revenue to revoke the same if during the course of investigation there appears to be any misrepresentation or misstatement of any kind. On the issue that only Japanese companies operating as Suppliers, Contractor's and Consultant will not be subjected to deduction of taxes, suffice it to state that the Exchange of Notes is particularly directed towards the non-utilization of loan amount in payment of taxes and is not dependent upon the nationality of the project contractor concerned. "Equality and uniformity of taxation means that all taxable articles or kinds of property of the same class be taxed at the same rate. The taxing power has the authority to make reasonable and natural classifications for purposes of taxation. To satisfy this requirement, it is enough that the statute or ordinance applies equally to all persons, forms and corporations placed in similar situation. ( City of Baguio v. De Leon, supra ; Sison, Jr V. Ancheta, supra )" Therefore, the gross payments by the NIA to Hanjin is not subject to the 8.5% creditable VAT withholding prescribed under Section 114(C) of the Tax Code of 1997 and to the expanded withholding tax prescribed under Section 57(B) of the same Tax Code pursuant to Revenue Memorandum No. 42-99 and Revenue Regulations No. 6-2001. ECcTaH Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group