Phil. Ecology Systems Corp.

May 12, 2008 BIR RULING [DA-286-08] RR 2-98; BIR Ruling No. DA-349-04 Phil. Ecology Systems Corp. 136 Malakas St. Diliman, Quezon City Attention: Mr. Carmencito L. Nombres President & Chief Executive Officer Gentlemen : This refers to your letter dated February 19, 2008 requesting for a ruling on the following: 1. Income tax on the sales/revenue generated from the New Navotas Sanitary Landfill; 2. Tax and Duty exemption on Imported Capital Equipment; 3. Tax Credit on Domestic Capital Equipment; and 4. Tax and Duty Exemption of Donations, Legacies and Gift relative to Phil. Ecology Systems Corp.'s ("Phileco" for brevity) Income Tax Holiday (ITH) on account of its registration with the Board of Investments (BOI) under Executive Order No. 226, otherwise known as the "Omnibus Investments Code of 1987." Documents show that Phileco is a corporation duly registered with the Securities and Exchange Commission (SEC) under SEC Registration No. A199721617 issued on February 5, 1998. It is also registered with the Board of Investments as a "New Operator of Waste Management Facility (New Navotas Sanitary Landfill) under Mandatory Inclusion Republic Act No. 9003 otherwise known as the Ecological Solid Waste Management Act on a non-pioneer status under Certificate of Registration No. 2007-182 dated October 16, 2007. Phileco has been granted a four-year income tax holiday incentive from January 2008 or from the actual start of operations, whichever is earlier, but not earlier than its date of registration. The ITH incentive shall be limited only to the sales/revenue generated from New Navotas Sanitary Landfill. EcDSTI In reply, please be informed that under Section 2.57.5 (B) (2) of Revenue Regulations (RR) No. 2-98, as amended, implementing Section 57 (B) of the Tax Code of 1997, as amended, the withholding tax prescribed in the said Regulations shall not apply to income payments to persons enjoying exemption from the income tax provided by Republic Act No. 7916 and the Omnibus Investments Code of 1987. Accordingly, since Phileco is a BOI-registered enterprise, enjoying exemption from payment of income taxes pursuant to the provisions of Section 39 (a) (1) of the Omnibus Investments Code of 1987 for a period of four (4) years reckoned from January 2008, this Office is of the opinion as it hereby holds, that it is exempt from the payment of the creditable withholding tax imposed under RR No. 2-98, as amended, on income payments received by it during the aforementioned period with respect to its registered activity. In respect to issues #2, 3 and 4, please be informed that Phileco should apply for a ruling on a per transaction basis i.e. , one ruling for every donation. 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 as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service