BIR Ruling [DA-193-04]

April 6, 2004 BIR RULING [DA-193-04] Section 27 (C) BIR Ruling No. 74-98 Mr. Dominador J. Dayag DJ Builders General Construction & Engineering 148 D. Roosevelt Avenue, SFDM Quezon City S i r : This refers to your letter dated January 27, 2004 requesting, in effect, for a ruling exempting you from the 2% creditable withholding tax pursuant to Revenue Regulations No. 2-98, as amended by Revenue Regulations No. 6-2001. Documents show that on November 6, 2003, the Department of Trade and Industry-Office of Legal Affairs (DTI-OLA), with office address at 4/F, DTI Bldg., 361 Sen. Gil J. Puyat Ave., Makati City and DJ Builders General Construction & Engineering (DJ Builders) with address at 148 D. Roosevelt Avenue, SFDM, Quezon City, executed a Contract of Services for the Renovation of the Premises of the Office of Legal Affairs, DTI; that Section A(1) of the said Contract provides that DTI-OLA shall exempt DJ Builders from government taxes; that DTI-OLA is a government agency of the Department of Trade and Industry (DTI); that DTI-OLA was in urgent need of renovating its Hearing Room and Office proper at the DTI Building in order to give its premises the corporate look; and that DJ Builders undertook the said renovation. In reply, please be informed that pursuant to Section 2.57.2 of Revenue Regulations (Rev. Regs.) No. 2-98, as amended by Rev. Regs. No. 6-2001, there shall be withheld a creditable income tax at the rate of 2% based on the gross payments to general building and engineering contractors. Although DTI-OLA is a government agency, it is, however, not exempt from income tax and consequently, to withholding tax, pursuant to Section 27(C) of the Tax Code of 1997, which expressly provides that only the Government Service Insurance System (GSIS), the Social Security System (SSS), the Philippine Health Insurance Corporation (PHIC), the Philippine Charity Sweepstakes Office (PCSO) and the Philippine Amusement and Gaming Corporation (PAGCOR) shall be exempt from income tax. ( BIR Ruling No. 74-98 dated May 24, 1998 ) Moreover, Presidential Decree Nos. 1931 and 1955 issued on June 11, 1984, and October 14, 1984, respectively, withdrew the tax and duty exemption privileges, including the preferential tax treatment, of government-owned or controlled corporations and all other units of government and private entities. Corollary to this, Executive Order No. 93 effective March 10, 1987 withdrew all tax and duty incentives granted to government and private entities. In view of the foregoing, your request for exemption from the payment of the 2% creditable withholding tax on the income payments to you by DTI-OLA is hereby denied for lack of legal basis. STIEHc 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, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group