Request of Vitarich Corporation for the Suspension of the Imposition of the Minimum Corporate Income Tax

April 16, 1999 BIR RULING [DA-242-99] MEMORANDUM FOR : Edgardo B. Espiritu Secretary of Finance FROM : Beethoven L. Rualo Commissioner of Internal Revenue SUBJECT : Request of Vitarich Corporation for the Suspension of the Imposition of the Minimum Corporate Income Tax (MCIT) DATE : April 12, 1999 This refers to the letter dated July 14, 1998 of the abovenamed taxpayer requesting for the suspension of the imposition of the Minimum Corporate Income Tax (MCIT) pursuant to Section 27(E)(3) of the Tax Code of 1997. It is represented that due to adverse market conditions which started in 1996, it realized negative gross profits due to market oversupply and the currency turmoil that started in July, 1997; that it has been unable to meet its obligations as they mature; that it is now negotiating with the creditor banks for debt restructuring, and unless this is done, its survival is hanging at the balance; that the company has incurred substantial losses totaling P1.23B in the last two and a half years broken down as follows, viz: Year Losses 1996 P389,212,459.00 1997 646,007,675.00 1998 (as of June) 236,794,143.00 Total Losses P1,272,014,277.00 ============== that recovery is not expected until year 2000; and that Revenue Examiners Aniano M. Castro, Jr. and Nonito C. Alcana of Revenue District No. 25 Plaridel, Bulacan, have favorably recommended the granting of the request of subject taxpayer for the suspension of the imposition of MCIT. Section 27(E)(3) of the Tax Code of 1997, as implemented by Revenue Regulations No. 9-98, provides that the Secretary of Finance is hereby authorized to suspend the imposition of the minimum corporate income tax on any corporation which suffers on account of prolonged labor dispute or because of force majeure , or because of legitimate business reverses. The term "legitimate business reverses" shall include substantial losses sustained due to fire, robbery, theft or embezzlement, or for other economic reason as determined by the Secretary of Finance. (Sec. 2.27(E)(4)(d), Revenue Regulations No. 9-98) In view of the foregoing, it is respectfully recommended that request of Vitarich Corporation for the suspension of the imposition of the MCIT on account of continuing losses be granted for 1998. aisadc (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue APPROVED: (SGD.) EDGARDO B. ESPIRITU Secretary of Finance