BIR Ruling [DA-254-98]

June 19, 1998 BIR RULING [DA-254-98] Sycip Gorres Velayo & Co. 6760 Ayala Avenue Makati City Attention: Atty . C . P . Noel Tax Division Gentlemen : This refers to your letter dated May 12, 1997 requesting on behalf of your client, Shimizu Philippine Contractors, Inc., confirmation of your opinion that it is exempt from the payment of expanded withholding tax imposed under Revenue Regulations No. 12-94 for the taxable year 1998, on the ground that it has incurred operational losses for the taxable years ending December 31, 1996 and December 31, 1997. cdtech Documents submitted show that Shimizu Philippine Contractors, Inc. incurred operating losses for calendar years 1996 and 1997; and that its audited financial statements for the taxable years ending December 31, 1996 and December 31, 1997, particularly its Statement of Income and Retained Earnings, indicated that the corporation has incurred net operating losses in the respective amounts of P62,637,063.00 and P24,562,038. In reply, please be informed that under Section 4(d) of Revenue Regulations No. 6-85, as amended by Revenue Regulations No. 12-94, implementing Section 50(b) of the Tax Code as amended, (now Section 57(B) of the Tax Code of 1997) the withholding tax prescribed in these regulations shall not apply to income payments of a payee who suffered net operating losses during the immediately preceding two (2) taxable years. Such being the case, we hereby confirm your opinion that Shimizu Philippine Contractors, Inc. is exempt from the payment of the expanded withholding tax for taxable year 1998 under Section 3, Revenue Regulations No. 12-94, amending Section 4 of Revenue Regulations No. 6-85. (BIR Rulings No. 126-94 dated August 15, 1994; BIR Rulings No. DA-221-98 dated June 5, 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, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)