BIR Ruling [DA-195-98]

May 15, 1998 BIR RULING [DA-195-98] Sycip Gorres Velayo & Co. 3rd Floor Insular Life Building cor. Gorordo and Gen. Maxilon Avenues Cebu City Attention: Mr . Lauris L . Dela Pea Tax Division Gentlemen : This refers to your letter dated March 24, 1998 requesting for the issuance of a certificate of exemption from the creditable withholding tax of 5% on income payments made to your client, Tamiya Philippines, Inc. (TPI). prcd Documents submitted show that Tamiya Philippines, Inc. (TPI) is a domestic corporation organized and existing under the laws of the Philippines with principal office address at Mactan Economic Zone II, Lapu-lapu City; that it is registered with the Export Processing Zone Authority (now Philippine Economic Zone Authority) on September 15, 1994 as a Zone Export Enterprise under a non-pioneer status under Certificate of Registration No. 94-66; that TPI as a registered non-pioneer firm is enjoying an income tax holiday for four (4) years from date of commercial operation as one of its incentives under Article 39 of E.O. No. 226, otherwise known as the Omnibus Investments Code of 1987; that TPI is currently leasing a part of its building inside the zone to another export enterprise; and that the rental income earned by TPI on this transaction has been subjected to the expanded withholding tax at the rate of 5%. In reply, please be informed that Section 4(b)(2) of Revenue Regulations No. 6-85, as amended by Revenue Regulations No. 12-94, provides that the withholding tax therein prescribed shall not apply to income payments to persons enjoying exemption from payment of income tax pursuant to the provision of the Omnibus Investments Code of 1987, as amended. Since TPI is enjoying an income tax holiday for four (4) years from July 3, 1995, the date of its commercial operation pursuant to Section 39 of E.O. 226 otherwise known as the Omnibus Investments Code of 1987, the income payments made to it as lessor of building inside the economic zone shall not be subject to the 5% creditable withholding tax prescribed under Revenue Regulations No. 12-94. (BIR Ruling Nos. 50(b)1000-00/163-94 dated December 2, 1994, and UN-339-94 dated December 6, 1994) 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, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)