BIR Ruling [DA-216-05]

May 3, 2005 BIR RULING [DA-216-05] RR 2-98; DA-094-2003 dtd 3/26/03 Ms. Teresita S. Opea 6th Flr. Executive Bldg. Center Gil Puyat Ave. cor. Makati Ave. Makati City M a d a m : This refers to your letter dated November 17, 2004, requesting in behalf of your client, GLOBAL SEWING, INC. with business address at Bldg. 114 Philexcel Industrial Park M.A. Roxas Hi-way, 1961st Area Clarkfield, Pampanga, clarification on whether or not its sale of services is exempt from withholding tax. It is represented that your client is a 100% export-oriented enterprise, registered with the Clark Special Economic Zone (CSEZ),enjoying the 5% Gross Income Tax incentive. In reply, please be informed that Section 2.57.5(B) of Revenue Regulations No. 2-98 is explicit in its provisions that the expanded withholding tax does not apply to income payments to persons enjoying exemption from the payment of income taxes pursuant to the provisions of any law, general or special. A CSEZ-registered enterprise enjoys exemption from payment of income tax pursuant to the provisions of Section 15 of Republic Act No. 7227/Executive Order No. 62, Sec. 5 of E.O. No. 80/Proclamation No. 163 and Revenue Regulations No. 6-97. Such being the case, your client being CSEZ-registered enterprise and enjoying the 5% preferential tax rate under a special law is exempt from the 2% withholding tax on income payments received by it from its customers/the large taxpayers whether ECOZONE registered or customs territory enterprises. (BIR Ruling DA 381-2000 dated November 7, 2000). ITESAc 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.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group