BIR Ruling [DA-263-98]

June 23, 1998 BIR RULING [DA-263-98] Fe-Tronic Manufacturing (Phils.), Inc. Park Technology Bldg. 2, Lot 6, Blk 6, Phase 2 Cavite Export Processing Zone Rosario, Cavite Attention: Mr . Michael K . Chua President Gentlemen : This refers to your letter dated September 4, 1997, requesting in effect for a ruling that you are exempt from the payment of taxes as an ECOZONE Enterprise. cdta Documents submitted disclosed that Fe-Tronic Manufacturing Phils., Inc. is a corporation organized and existing under Philippine laws; that you are registered as an Ecozone Export Enterprise at the Cavite Economic Zone under Certificate of Registration No. 97-013; that you are engaged in the manufacture of magnetic products, coil assembly and transformers; and that you are entitled to all incentives granted to non-pioneer firms under R. A. No. 7916, entitled "An Act Providing for the Legal Framework and Mechanisms for the Creation, Operation, Administration, and Coordination of Special Economic Zones in the Philippines, Creating for this Purpose, the Philippine Economic Zone Authority (PEZA), and for Other Purposes". In reply, please be informed that Section 24 of 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: . . ." cdti Accordingly, as a business establishment operating within the ECOZONE, Fe-Tronic shall, in lieu of paying local and national taxes, be subject to the payment of the preferential tax rate of 5% based on its gross income earned within the ECOZONE which shall be remitted to the national government. (BIR Ruling No. DA-082-97 dated February 27, 1997) This ruling is 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. cdt Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)