BIR Ruling [DA-189-00]

March 30, 2000 BIR RULING [DA-189-00] RR 2-98 339-94 DA-189-2000 Capitol Steel Corporation P.O. Box 1300, Ortigas Center Pasig, Metro Manila Attention: Mr . Berck Y . Cheng Executive Assistant Gentlemen : This refers to your letter dated July 7, 1998 requesting for a Certificate of Exemption from the payment of creditable expanded withholding tax prescribed under Revenue Regulations No. 2-98 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 Capitol Steel Corporation (Capitol) is registered with the BOI under the Iron and Steel Industry Modernization Program with a preferred non-pioneer status, under Certificate of Registration No. 97-165 dated October 7, 1997; and that you are entitled to an Income Tax Holiday for three (3) years pursuant to No. 9(a) of the Specific Terms and Conditions accompanying your Certificate of Registration, viz: "9. The enterprise shall be entitled to the following incentives: a. Income Tax Holiday (ITH) for a period of three (3) years with a base figure of 32,500 MT from October 1997 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 the final ITR with BIR." In reply, please be informed that Section 2.57.5(B)(2) of Revenue Regulations No. 2-98, implementing Section 57(B) of the Tax Code of 1997, 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 Capitol 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 by local suppliers of goods shall not be subject to 1% expanded creditable withholding tax prescribed in Revenue Regulations No. 2-98 for a period of three (3) years with a base figure of 32,500 MT from October, 1997. (BIR Rulings No. 163-94 dated December 2, 1994; UN 339-94 dated December 6, 1994) 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.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)