BIR Ruling [DA-329-06]

May 18, 2006 BIR RULING [DA-329-06] Section 57 (B); BIR Ruling No. DA-046-99 JFE Shoji Steel Philippines, Inc . 107 Trade Avenue Laguna Technopark, Bo. Loma, Bian, Laguna Attention: Mr. Atsushi Eukue Administration and Finance Manage r Gentlemen : This refers to your letter dated March 27, 2005 requesting for confirmation of your opinion that income payments to JFE Shoji Steel Philippines, Inc. (JSSPI) by its customers are exempt from the creditable withholding tax. As represented, JSSPI is a corporation registered with Philippine Economic Zone Authority (PEZA) under PEZA Certificate of Registration No. 05-23 issued on May 10, 2005 with processing/fabrication, slitting of all metals, ferrous and non-ferrous and their products and derivatives as its registered activity. It commenced paying the 5% preferential gross income tax on May 10, 2005 in lieu of all taxes pursuant to the provision of Republic Act (RA) No. 7916, as amended by RA No. 8748. In reply, please be informed that under Section 5 of Revenue Regulations (Rev. Regs.) No. 1-2000, dated November 12, 1999 (as amended by Rev. Regs. No. 2-2005), the total amount representing 5% of the gross income earnings by all registered enterprises from the operation of their business activities inside, among others, Special Economic Zones under PEZA shall be paid to any accredited bank within the Revenue District Office having jurisdiction over the respective ECOZONES on or before the 15th day of the fourth month following the close of the taxable year, whether calendar or fiscal year accounting period, in accordance with Title II, Chapter XII, of the Tax Code of 1997. Furthermore, pursuant to then Section 4(b)(2) of Rev. Regs. No. 6-85, as amended by Rev. Regs. No. 12-94 and as further amended by Section 2.57.5(B) of Rev. Regs. No. 2-98, as amended, the withholding taxes therein prescribed shall not apply to income payments to persons enjoying exemption from payment of the income taxes. Accordingly, JSSPI is exempt from payment of national and local taxes, in lieu of which, it is subject to the 5% tax based on the gross income earned as defined in Rev. Regs. No. 1-2000, and is, therefore, exempt from the creditable expanded withholding tax pursuant to Section 2.57.5(B) of Revenue Regulations No. 2-98, as amended, implementing Section 57(B) of the Tax Code of 1997. 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. ADSTCI Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service