BIR Ruling [DA-245-02]

December 18, 2002 BIR RULING [DA-245-02] RR 2-98 DA-087-2001 Royal Cargo Combined Logistics, Inc. RCC Bldg., Sta. Agueda Avenue, Pascor Drive, Paraaque City, 1704 Metro Manila Attention: Eva De Leon-Sunga Head Financial Controllership Dept. Gentlemen : This refers to your letter dated 14 February 2002, requesting the issuance of a Certificate of Tax Exemption in favor of Royal Cargo Ecozone Logistics, Inc. (Royal Cargo). AIaHES It is represented that Royal Cargo was registered with PEZA last December 11, 2001, and that it was issued PEZA Certificate of Registration No. 01-017-F dated 11 December 2001, as amended by certificate dated 5 February 2002, and PEZA Certification for zero percent (0%) VAT for sales. In reply, please be informed that Section 24 of Republic Act (R.A.) No. 7916 provides: "SEC. 24. Exemption from Taxes under the National Internal Revenue Code Any provision of existing laws, rules and regulations to the contrary notwithstanding, no taxes, local and national, shall be imposed on business establishments operating within the ECOZONE. In lieu of paying taxes, five percent (5%) of the gross income earned by all businesses and enterprises within the ECOZONE shall be remitted to the national government. This five percent (5%) shall be shared and distributed as follows: "(a) Three percent (3%) to the national government; "(b) One percent (1%) to the Local government units affected by the declaration of the ECOZONE in proportion to their population, land area, and equal sharing factors; and "(c) One percent (1%) for the establishment of a development fund to be utilized for the development of municipalities outside and contiguous to each ECOZONE: ..." Thus, as a PEZA-registered business establishment operating within the ECOZONE, Royal Cargo Ecozone Logistics, Inc. shall be subject to the payment of preferential tax rate of 5%, in lieu of paying local and national taxes, based on its gross income earned within the ECOZONE which shall be remitted in accordance with R.A. No. 8748, which amended R.A. No. 7916. Accordingly, since you are exempt from payment of national and local taxes, and in lieu of which, you are subject to the 5% tax based on the gross income earned as defined under Revenue Regulations No. 12-97, as further amended by Revenue Regulations No. 1-2000, this Office is of the opinion as it hereby holds that you are exempt from the creditable withholding tax imposed under Section 2.57.5(B) of Revenue Regulations No. 2-98, implementing Section 57(B) of the Tax Code of 1997 on income payments received by your company from the importation/procurement of electronics and semiconductor parts and components for packing, re-packing, kitting sub-assembly, and other related activities, for resale/constructive export to PEZA-registered export enterprises at the Cavite Economic Zone, Rosario, Cavite and Laguna Technopark-Special Economic Zone, Bian, Laguna. (BIR Ruling No. 163-94 dated December 2, 1994 and BIR Ruling No. DA-263-98 dated June 23, 1998) 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, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group