BIR Ruling [DA-333-98]

July 21, 1998 BIR RULING [DA-333-98] R. S. Bernaldo & Associates Unit 1810 Cityland 10 Tower 1 6815 Ayala Avenue, Makati City Metro Manila Attention: Atty . Rosario S . Bernaldo Managing Partner Gentlemen : This refers to your letter dated May 19, 1998 requesting on behalf of your client, Balibago Land Corporation (" Balibago Land "), for a ruling that the development, operation, sale or lease of lots by the said corporation is exempt from income tax, capital gains tax, value-added tax, documentary stamp tax and all other national taxes pursuant to Section 24 of Republic Act No. 7916, otherwise known as "The Special Ecozone Act of 1995". cdi It is represented that Balibago Land is a corporation organized and existing under the laws of the Philippines; that on January 14, 1998, the Board of the Philippine Economic Zone Authority; (PEZA Board) passed Resolution No. 98-013 approving the application of the said corporation to establish a special ecozone under Republic Act No. 7916 covering 50.01 hectare parcel of land owned by the corporation located at Barangay Don Jose, Sta. Rosa, Laguna; that on April 6, 1998, President Fidel V. Ramos issued Proclamation No. 1191 declaring the said parcel of land a special economic zone known as the "Greenfield Laguna Automotive Park"; that on April 30, 1998, PEZA and Balibago Land executed the Registration Agreement for the "Greenfield Automotive Park Special Economic Zone (GAP-SEZ)" by virtue of which PEZA issued Certificate of registration No. EZ-98-04 in favor of Balibago Land conferring upon it the status of an Ecozone Developer/Operator. In reply, please be informed that Article 24 of Republic Act No. 7916, otherwise known as "The Special Economic Zone Act of 1995", 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. . . .". Further, Section 1(A) of Rule XIV of the Rules and Regulations to Implement Republic Act No. 7916 promulgated by the PEZA Board pursuant to Sections 12(c) and 55 of R.A. No. 7916 dealing specifically with ecozone developers and operators provides, to wit: "RULE XIV INCENTIVES TO ECOZONE DEVELOPERS/OPERATORS "SEC. 1. ECOZONE Developers/Operators . ECOZONE Developers/Operators shall be entitled to the following incentives: "A. Exemption from National and Local Taxes and Licenses . An ECOZONE Developer/Operator shall, to the extent of its construction and operation, be exempt from payment of all national internal revenue taxes and all local government impost, fees, licenses or taxes, including but not limited to the following: "1. Internal revenue taxes such as gross receipts tax, Value-Added Tax, ad valorem and excise taxes; "2. Franchise, common carrier or value added taxes and other percentage taxes on public and service utilities and enterprises. "In lieu thereof, the ECOZONE Developer/Operator Enterprise shall pay a five percent (5%) final tax on gross income in accordance with the provisions of Rule XX of these Rules." The pertinent portions of PEZA Board Resolution No. 98-013 likewise provides, viz: "RESOLVED, that the application of BALIBAGO LAND CORPORATION for (1) the declaration of the 50.01-hectare property located in Brgy. Don Jose, Sta Rosa, Laguna as Special Economic Zone, subject to Presidential Proclamation, henceforth to be known as LAGUNA AUTOMOTIVE PARK ; and (2) the registration of BALIBAGO LAND CORPORATION as Developer/Operator of the said Ecozone be APPROVED , subject to the following terms and conditions: "1. That to the extent of the area it shall develop, BALIBAGO LAND CORPORATION shall be entitled to the following incentives upon its registration with PEZA, which shall be after the subject areas are proclaimed as Ecozone by the President: " The five percent (5%) Gross Income Tax Incentives under R.A. 7916; "xxx xxx xxx." In view of the foregoing, this Office is of the opinion that the development, operation, sale or lease of lots of your client, BALIBAGO LAND CORPORATION, as a PEZA Ecozone Developer or Operator is exempt from income tax, capital gains tax, value-added tax and all other national internal revenue taxes. In lieu thereof, your client is liable to pay the five (5%) final tax on its gross income from said activities computed in accordance with subsection (2), Section 2, Rule XX of the Rules and Regulations to Implement R.A. No. 7916. Consequently, it is likewise exempt from the creditable expanded withholding tax pursuant to Section 2.57.2(J) of Revenue Regulations No. 2-98. (BIR Ruling DA-198-98 dated May 15, 1998; DA 54-98 dated February 12, 1998) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it shall 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 & Enforcement Group