BIR Ruling [DA-195-96]

June 14, 1996 BIR RULING [DA-195-96] San Miguel Corporation 40 San Miguel Avenue Mandaluyong City Attention: Mr . Jose S . Tayag, Jr . VP and Manager, Tax Department Gentlemen : This refers to your letter dated April 21, 1996 requesting exemption from payment of the expanded withholding tax on income payments to be made to one of your subsidiaries, Instafood Corporation of the Philippines (Instafood), pursuant to Revenue Regulations No. 6-85, as amended by Revenue Regulations No. 12-94. It is represented that Instafood is a domestic corporation engaged in the ready-to-eat food business; and that for the past (2) years (1994 and 1995), Instafood has been incurring net operating losses on its business operations in the amounts of P46,787,399.00 and P132,339,492.00 respectively as evidenced by its duly audited financial statements and income tax returns. aisadc In reply, please be informed that Section 4(d) of Revenue Regulations No. 6-85, as amended by Revenue Regulations No. 12-94, otherwise known as the "Expanded Withholding Tax Regulations" provides that "SEC. 4. Exemption from withholding . The withholding of tax prescribed in these regulations shall not apply to income payments in the following cases: xxx xxx xxx (d) In the case of a payee who suffered net operating losses during the immediately preceding two (2) years; xxx xxx xxx Such being the case, since Instafood suffered net operating losses during the immediately preceding two (2) tax years, 1994 and 1995, this Office is of the opinion as it hereby holds that income payments to be made to Instafood are exempt from the creditable expanded withholding tax (BIR Ruling No. 126-94 dated August 15, 1994). This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, the facts turn out to be different, then this ruling shall be considered null and void. Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)