BIR Ruling [DA-244-98]

June 15, 1998 BIR RULING [DA-244-98] Subic Bay Metropolitan Authority Labor Center Bldg. 255, Barrymore Road Subic Bay Free Port Zone Attention: Mr . Pierre R . Orea Labor Center Gentlemen : This refers to your letter dated September 8, 1997, requesting our opinion on the following queries earlier posed by Executive Director Ciriaco A . Lagunzad III of the National Wages and Productivity Commission in his letter dated August 2, 1997, to wit: "1. Can SBF enterprises avail of the tax incentives under RA 6971? "2. If yes, how will the tax incentive under RA 6971 be applied? cdtech In his letter, Director Lagunzad states that Republic Act No. 6971, otherwise known as the Productivity Incentives Act of 1990, grants to enterprises registered under the Act a special deduction from the gross income equivalent to 50% of the total productivity bonuses and training expenses granted to workers; that on the other hand, Republic Act No. 7227, otherwise known as the Bases Conversion and Development Act of 1992, stipulates the enterprises registered with the Subic Bay Metropolitan Authority (SBMA) shall pay a tax equivalent to 5% of the gross income earned; and that according to you, SBMA is presently beginning to conduct 5S Orientation Seminars and 5S Installation to interested companies, with line supervisors, rank and file employees and management representatives in attendance. In reply, please be informed that Question No. 1 is answered in the negative. As correctly pointed out, the basis of the 5% tax payable by an enterprise registered and operating within the Secured Area in the Zone is gross income earned. Section 3(o) of Revenue Regulations No. 1-95 implementing the tax incentive provisions under Section 12, paragraphs (b) and (c) of R.A. No. 7227, gives the definition of "gross income earned" and specifies the allowable deductions for the calculation of gross income earned by each specific type of business registered with SBMA. Since the regulations provide for the particular allowable deductions, no other deduction may be made therein. Thus, the special deduction equivalent to 50% of the total productivity bonuses granted to employees as provided for in Section 7 of RA No. 6971 can no longer be availed of by a SBMA registered enterprise which also adopts a productivity incentives program and/or grants manpower training and special studies. Otherwise, it will considerably reduce the amount of the gross income earned upon which the 5% tax payable by a SBMA registered enterprise is based. Answer to Question No. 2 is deemed unnecessary in view of the foregoing answer to Question No. 1. aisadc Very truly yours, (SGD.) LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue