BIR Ruling [DA-357-06]

June 9, 2006 BIR RULING [DA-357-06] R.R. 2-98; BIR Ruling No. DA-089-05 Zoom In Packages, Inc . 12/F, Times Plaza Building United Nations corner Taft Avenues Ermita, Manila Attention: Ms. Marlita M. Villacampa VP - Chief Finance Officer Gentlemen : This refers to your letter dated March 21, 2006 indorsed to this Office on March 28, 2006 by Chief of Withholding Tax Division Marivic A. Galban, requesting for confirmation of your opinion that the logistics service revenue earned by Zoom In Packages, Inc. ("ZIP, Inc.") is exempt from the 2% expanded withholding tax under Revenue Regulations (RR) No. 2-98, as amended by Section 4 of RR No. 14-2002. As represented, ZIP, Inc. has been approved by the Board of Investments (BOI) as a non-pioneer logistics service operator under Certificate of Registration No. 2005-026 dated February 18, 2005. It started commercial operations in May 2005. As a non-pioneer status, the BOI granted ZIP, Inc. an Income Tax Holiday (ITH), which exempts its service income from income tax for a period of four (4) years from May 2005 or actual start of commercial operations, whichever is earlier but in no case earlier than the date of registration. In support of your request, you attached a photocopy of BOI Certificate of Registration No. 2005-025 dated February 18, 2005. In reply, please be informed that this Office ruled in BIR Ruling No. DA-089-05 dated March 14, 2005 as follows: ". . . Section 2.57.5(B) of RR No. 2-98, as amended is explicit in its provisions that the expanded withholding tax does not apply to income payments to persons enjoying exemption from the payment of income taxes pursuant to the provisions of any law, general or special. BOI-registered enterprises enjoy exemption from payment of income taxes pursuant to the provisions of Section 39(a)(1) of the Omnibus Investments Code of 1987, such as the income tax holiday." In view of the foregoing, this Office confirms your opinion that the logistics service revenue earned by ZIP, Inc. is exempt from the 2% expanded withholding tax under RR No. 2-98, as amended. ADScCE 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