BIR Ruling [DA-368-99]

June 24, 1999 BIR RULING [DA-368-99] Castillo Laman Tan Pantaleon & San Jose Law Offices The Valero Tower 122 Valero Street, Salcedo Village 1227 Makati City Attention: Atty . Mel A . Macaraig Atty . Joseph Gregson A . Castillo Atty . Virginia B . Viray Gentlemen : This refers to your letter dated February 22, 1999 stating that your client, Kvaerner Philippines Corporation Inc., a corporation organized and existing under Philippine laws, and with principal address at 16/F Multinational Bancorporation Centre, 6805 Ayala Avenue, 1200 Makati City is engaged in business as Service Exporter in the field of engineering designs and construction services, and was registered as such with the Board of Investments on April 7, 1997 on a preferred Pioneer Status under the Omnibus Investments Code of 1987 (E. O. 226), as amended; and that as such, it enjoys a 100% income tax holiday for a period of six (6) years. Based on the foregoing, you now request for a ruling that the income payments to Kvaerner Philippines Corporation Inc. are not subject to creditable withholding tax pursuant to Section 2.57.5(B)(2) of Revenue Regulations No. 2-98. In reply, please be informed that under Section 2.57.5(B)(2) of Revenue Regulations No. 2-98, implementing Section 57(B) of the Tax Code of 1997, 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 Kvaerner Philippines Corporation Inc. is a BOI-registered enterprise, enjoying exemption from payment of income taxes pursuant to the provisions of Section 39(a)(1) of the Omnibus Investment Code of 1987, for a period of six (6) years from April 1997 or actual start of its commercial operations, whichever comes first, but not earlier than the date of its registration, this Office is of the opinion, as it hereby holds, that it is exempt from the payment of the creditable withholding tax imposed under Revenue Regulations No. 2-98, on income payments received by it during the aforementioned period. (BIR Ruling Nos. 020-95 dated February 13, 1995 and DA-021-99 dated January 12, 1999) 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. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group