BIR Ruling [DA-400-06]

June 28, 2006 BIR RULING [DA-400-06] Section 57 (B); BIR Ruling No. DA-046-99 Omed Corporation 1/F Carmelray Industrial Park II, Admin Building Km. 54 National Highway, Brgy. Tulo Calamba, Laguna Attention: Mr. Prabakar P. Selvan Director Gentlemen : This refers to your letter dated March 23, 2006 requesting for a ruling exempting Omed Corporation ("Omed") from the creditable withholding tax. As represented, Omed is a Philippine Economic Zone Authority (PEZA)-registered Ecozone IT (Export) enterprise with PEZA Certificate of Registration No. 05-31-IT issued on October 11, 2005, to provide application development, IT consulting services and IT outsourcing. It commenced its operation on October 11, 2005. In reply, please be informed that under Section 5 of Revenue Regulations (Rev. Regs.) No. 1-2000, dated November 12, 1999 (as amended by Rev. Regs. No. 2-2005), the total amount representing 5% of the gross income earnings by all registered enterprises from the operation of their business activities inside, among others, Special Economic Zones under PEZA shall be paid to any accredited bank within the Revenue District Office having jurisdiction over the respective ECOZONES on or before the 15th day of the fourth month following the close of the taxable year, whether calendar or fiscal year accounting period, in accordance with Title II, Chapter XII, of the Tax Code of 1997. Furthermore, pursuant to then Section 4(b)(2) of Rev. Regs. No. 6-85, as amended by Rev. Regs. No. 12-94 and as further amended by Section 2.57.5(B) of Rev. Regs. No. 2-98, as amended, the withholding taxes therein prescribed shall not apply to income payments to persons enjoying exemption from payment of the income taxes. AcHaTE Accordingly, Omed is exempt from payment of national and local taxes, in lieu of which, it is subject to the 5% tax based on the gross income earned as defined in Rev. Regs. No. 1-2000, and is, therefore, exempt from the creditable expanded withholding tax pursuant to Section 2.57.5(B) of Revenue Regulations No. 2-98, as amended, implementing Section 57(B) of the Tax Code of 1997. 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