BIR Ruling [DA-389-99]

May 31, 1999 BIR RULING [DA-389-99] 2nd Indorsement Respectfully returned to Undersecretary Solomon S. Cua his referral-letter dated January 18, 1999 concerning the request of Subic Bay Metropolitan Authority (SBMA) dated 7 January 1999 for the interpretation of Section 27 (c) of the Tax Code of 1997 with the information that the same was already addressed by this Office in BIR Ruling No. DA-036-99 issued on January 20, 1999, copy of which is hereto attached for your ready reference. It is the opinion of the SBMA that it enjoys exemption from income tax as provided for under Sec. 12(c) of R.A. 7227, otherwise known as the Bases Conversion Development Act. In holding a contrary opinion, this Office maintained in the above-referred ruling that a) Section 27(c) of the Tax Code of 1997 expressly states that all corporations, agencies or instrumentalities owned or controlled by the Government shall be subject to income tax. It likewise enumerates only five (5) Government-Owned or -Controlled Corporations specifically exempt from the tax but SBMA is not one of them . b) Section 7 of R.A. 8424, otherwise known as the Tax Reform Act of 1997 provides that " . . . all other laws, including charters of government-owned or controlled corporations, decrees, orders or regulations or parts thereof, that are inconsistent with this Act are hereby repealed or amended accordingly ". It is therefore our submission that the provision of R.A. 7227, as relied upon by SBMA as the source of its exemption, has now been effectively superseded or modified by R.A. 8424. c) SBMA is not likewise exempt from the creditable expanded withholding tax since Government-Owned or -Controlled Corporations, not otherwise exempted from paying taxes, such as the SBMA, are no longer included among the entities exempted from withholding tax pursuant to Sec. 2.57.5 of Revenue Regulations No. 2-98. DIHETS The parties, SBMA and the Revenue District Officer Subic Freeport Zone, have been duly furnished with copies of the action taken in the premises. (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue