SGV & Co.

March 27, 2007 BIR RULING [DA-182-07] 46; 47; DA-161-99; DA-444-2006 SGV & Co. 6760 Ayala Avenue 1226 Makati City Attention: Atty. Wilfredo U. Villanueva Principal, Tax Services Gentlemen : This refers to your letter dated January 19, 2007 requesting on behalf of your client, Sumitomo Corporation-Manila Branch ( SC-Manila or the company), for the approval of the company's change in accounting period from the current fiscal year (FY) ending February 28/29 to FY ending March 31. It is represented that Sumitomo Corporation is a foreign corporation organized and existing under the laws of Japan and is duly licensed to do business in the Philippines through its Manila Branch; That it is registered with the Bureau of Internal Revenue as a large taxpayer with Tax Identification No. 000-145-521-000; That to achieve operational efficiencies and to improve further the internal coordination with the other Sumitomo offices worldwide, SC-Manila, in line with the Tokyo Head Office directives, adopted and implemented the migration of its computerized accounting system (CAS) from the current system to SAP; That corollary to this directive, SC-Manila would like to change its accounting period from FY ended February 28/29 to FY ended March 31 to synchronize it with that of its Tokyo head office and to align its reportorial requirements with the offices worldwide; That for the past three years, SC-Manila opened and closed its books of account on March 1 and February 28/29, respectively. In view of the foregoing, SC-Manila is requesting that: 1. The Company's change in accounting period from the current FY ending February 28/29 to FY ending March 31 be approved; 2. Its short period return/final adjustment return for the period between the close of the former fiscal year and the date designated as the close of the new fiscal year (March 1-31, 2007) shall be filed on or before June 15, 2007 and the tax due thereon, if any, be paid at the time of filing; and, 3. Thereafter, its annual income tax return covering the twelve (12) month period from April 1 to March 31 of the following year be filed on or before July 15 following the close of such fiscal year and the tax due thereon paid at the time of filing [Section 77 (B) (C), 1997 Tax Code]. TacSAE In reply, please be informed that pursuant to Sections 46 and 47 of the 1997 Tax Code, SC-Manila's request for change in accounting period from the current FY ending February 28/29 to FY ending March 31 is granted, provided that SC-Manila complies with the provisions of Section 47 (a) of the said Tax Code [BIR Ruling No. DA-043-99 dated January 22, 1999; BIR Ruling No. 023-97 dated January 15, 1997; BIR Ruling No. DA-444-06 dated July 27, 2006]. Section 46 and 47 of the 1997 Tax Code provides: "SEC. 46. Change of Accounting Period. If a taxpayer, other than an individual, changes his accounting period from fiscal year to calendar year, from calendar year to fiscal year, or from one fiscal year to another, the net income shall, with the approval of the Commissioner, be computed on the basis of such new accounting period, subject to the provisions of Section 47. SEC. 47. Final or Adjustment Returns for a Period of Less than Twelve (12) Months . (A) Returns for Short Period Resulting from Change of Accounting Period. If a taxpayer, other than an individual, with the approval of the Commissioner, changes the basis of computing net income from fiscal year to calendar year, a separate final or adjustment return shall be made for the period between the close of the last fiscal year for which return was made and the following December 31. If the change is from calendar year to fiscal year, a separate final or adjustment return shall be made for the period between the close of the last calendar year for which return was made and the date designated as the close of the fiscal year. If the change is from one fiscal year to another fiscal year, a separate final or adjustment return shall be made for the period between the close of the former fiscal year and the date designated as the close of the new fiscal year. (B) Income Computed on Basis of Short Period. Where a separate final or adjustment return is made under Subsection (A) on account of a change in the accounting period, and in all other cases where a separate final or adjustment return is required or permitted by rules and regulations prescribed by the Secretary of Finance, upon recommendation of the Commissioner, to be made for a fractional part of a year, then the income shall be computed on the basis of the period for which separate final or adjustment return is made." In addition, SC-Manila's short period return/final adjustment return for the period between the close of the former fiscal year and the date designated as the close of the new fiscal year (March 1-31, 2007) shall be filed on or before June 15, 2007 and the tax due thereon, if any, be paid at the time of filing [ BIR Ruling No. DA-161-99 dated March 17, 1999 ]. Finally, SC-Manila's annual income tax return covering the twelve (12) month period from April 1 to March 31 of the following year be filed on or before July 15 following the close of such fiscal year and the tax due thereon paid at the time of filing [Section 77 (B) (C), 1997 Tax Code). This will, therefore, serve as your authority to change your accounting period from the current FY ending February 28/29 to FY ending March 31 upon your compliance with the requirement of filing a short period return. SHIETa 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. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service