BIR Ruling [DA-348-03]

October 9, 2003 BIR RULING [DA-348-03] RA 7916; VAT Ruling Nos. 089-02; 008-99 Joaquin Cunanan & Co. 29th Floor Philamlife Tower 8767 Paseo de Roxas Makati City Attention: Mr. George J. Lavadia Principal Tax Services Gentlemen : This refers to your letter dated June 26, 2003 stating that your client, Katolec Philippines Corporation (KPC) is a Philippine subsidiary of Shikoku Precision Corporation, a non-resident Japanese corporation; that it is registered with the Securities and Exchange Commission (SEC) to engage primarily in the manufacture, design, mounting, and assembly of electronic parts and components such as, but not limited to, circuit boards transistors, coils and switches; that KPC is also registered with the Philippine Economic Zone Authority (PEZA) as an ecozone export enterprise, on a non-pioneer status; that its principal office and factory are both located at 103 East Main Avenue Special Export Processing Zone, Laguna Technopark, Bian, Laguna; that as a PEZA registrant, KPC is entitled to certain incentives and tax benefits including income tax holiday (ITH) for four (4) years from start of actual production in June 1997 up to June 1, 2001; that following the expiration of its ITH, KPC now pays the preferential tax rate of 5% on its gross income from its PEZA-registered activities; that as an export entity, KPC is wholly and totally dependent on its foreign client base and thus has no recourse but to conform with and accommodate the changing demands of its foreign customers; that consequently, several equipment and machineries previously used in its operations were replaced by new acquisitions to cope with the changing business conditions of KPC's clients; that during taxable year 2002, KPC sold the used and replaced equipment and machineries to its non-residents affiliates abroad and to a PEZA registered firm which were paid for in US dollars or Japanese Yen, inwardly remitted to the accounts of KPC with banks located here in the Philippines in accordance with the BSP rules and regulations; and that the transfer and sale of the equipment and machineries were pre-approved by the Zone Manager of the Laguna Technopark. 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 null and void. EcIaTA Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group