BIR Ruling [DA-197-96]

June 14, 1996 BIR RULING [DA-197-96] San Miguel Corporation 40 San Miguel Avenue Mandaluyong, Metro Manila Attention: Mr . Jose S . Tayag, Jr . VP and Manager, Tax Department S i r : This refers to your letter dated April 18, 1996 requesting exemption from payment of the creditable expanded withholding tax on income payments to be made to one of your subsidiaries, Monterey Farms Corporation (MFC), pursuant to Revenue Regulations No. 6-85, as amended by Revenue Regulations No. 12-94. cdt It is represented that Monterey Farms Corporation (MFC) is primarily engaged in agricultural production specifically in cattle and swine breeding as well as meat processing; and that for the past two (2) years (1994 and 1995), MFC has been incurring net operating losses on its business operations in the amount of P30,191,468.00 and P38,689,173.00, respectively, as evidenced by its duly audited financial statements and income tax returns. 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 viz: "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 cases of a payee who suffered net operating losses during the immediately preceding two (2) years; xxx xxx xxx Such being the case, since MFC suffered net operating losses during the immediately preceding two (2) tax years, the income payments to be made to MFC shall be 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, it will be disclosed that the facts are different, then this ruling shall be considered null and void. cd Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)