BIR Ruling [DA-256-04]

May 12, 2004 BIR RULING [DA-256-04] Section 27 (C) BIR Ruling No. 099-99 Philippine Health Insurance Corp. Citystate Centre, 709 Shaw Boulevard Pasig City Attention: Mr. Reynaldo N. Dalma, Jr. Senior Vice-President for Management Services Sector Gentlemen : This refers to your letter dated December 11, 2002 requesting for a ruling on whether payments to the Philippine Postal Corporation are not subject to withholding tax. In reply, please be informed that Section 2.57.5(A) of Revenue Regulations No. 2-98, as amended provides that the withholding of creditable withholding tax shall not apply to income payments made to the National Government and its instrumentalities, including provincial, city or municipal governments. It will be noted that, unlike in Revenue Regulations (Rev. Regs.) No. 12-94 which amended Rev. Regs. No. 6-85, government-owned or controlled corporations are not specifically mentioned in the enumeration. This is so, because under Section 27(C) of the Tax Code of 1997, all corporations, agencies or instrumentalities owned or controlled by the Government, except the Government Service Insurance System (GSIS), the Social Security System (SSS), the Philippine Health Insurance Corporation (PHIC), the Philippine Charity Sweepstakes Office (PCSO) and the Philippine Amusement and Gaming Corporation (PAGCOR) are now subject to such rate of tax upon their taxable income as are imposed upon corporations or associations engaged in similar business, industry or activity. Accordingly, since Philippine Postal Corporation is not among those listed as exempt from income tax under Section 27(C) of the Tax Code of 1997, it is, therefore, subject to withholding tax. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group