BIR Ruling [DA-387-05]

September 12, 2005 BIR RULING [DA-387-05] 57B; DA-060-2002; 300-2003 Global Steel Philippines (SPV-AMC), Inc . Unit 703, 27th Floor, 88 Corporate Center 141 Sedeo St., Salcedo Village Makati City Attention: Atty. Victoria G. De Los Reyes Chief of Legal Gentlemen : This refers to your letter dated August 23, 2005, requesting for exemption from the creditable withholding tax on income payments received during the ITH period pursuant to the provisions of Revenue Regulations No. 17-2003. Based on your representation and documents submitted to this Office, Global Steel Philippines (SPV-AMC), Inc. ("GSPI"), [formerly Global Steelworks International, Inc. ("GSII"), is registered with the Board of Investments (BOI) under Certificate of Registration No. 2004-136 dated December 7, 2004 as New Domestic Producer of Steel Products such as but not limited to Hot-Rolled Coil, Cold-Rolled Coil, Tinplates and Plates in accordance with the provisions of the Omnibus Investments Code of 1987 (E.O. 226); that under its Certificate of Registration, it was granted certain incentives, among others, an "Income Tax Holiday (ITH) for six (6) years from July 2005 or from the actual start of its commercial operations, whichever is earlier, but in no case earlier than the date of registration"; and that it started its commercial operations in July 2005 which is also the reckoning date of the ITH granted. by the BOI. In reply, please be informed that Section 2.57.5(B)(2) of Revenue Regulations (Rev. Regs.) No. 2-98, as amended by Rev. Regs. No. 6-2001, and as further amended by Rev. Regs. No. 17-2003 implementing Section 57(B) of the Tax Code, provides that the withholding tax prescribed in the said Regulations shall not apply to income payments to persons enjoying exemption from income tax pursuant to the provisions of Republic Act No. 7916 and the Omnibus Investments Code of 1987. Considering therefore, that GSPI is a BOI-registered enterprise enjoying ITH for a period of six (6) years reckoned from July 2005 which is the date specified under the Terms and Conditions of its Certificate of Registration in accordance with the provisions of Section 39(a)(1) of E.O. 226, this Office is of the opinion as it hereby holds that it is exempt from the payment of creditable withholding tax prescribed in Rev. Regs. No. 2-98, as amended by Rev. Regs. Nos. 6-2001 and 17-2003 on income payments received during the ITH period, in connection with its registered activity. Consequently, as a New Domestic Producer of Steel Products such as but not limited to Hot-Rolled Coil, Cold-Rolled Coil, Tinplates and Plates, GSPI is exempt from the provision of Section 3(M) of Rev. Regs. No. 17-2003 which imposes upon the top ten thousand (10,000) private corporations the duty to withhold an equivalent of one percent (1%) creditable withholding tax on their income payments to their supplier of goods. 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. ASCTac Very truly yours, (SGD.) JOSE MARIO C. BUAG OIC-Commissioner of Internal Revenue