BIR Ruling [DA-417-00]

December 7, 2000 BIR RULING [DA-417-00] DA-270-99 Subic Shipyard and Engineering, Inc. Cabangaan Point, Bo. Cawag Subic, Zambales Attention: Ms . Agnes Barbara L . Lorenzo Dept. Manager, Admin. & Finance Gentlemen : This refers to your letter dated January 17, 2000 stating that you are an economic zone enterprise duly registered with the Philippine Economic Zone Authority (PEZA) with Certificate of Registration No. 96-003 dated January 10. 1996; that your shipyard is situated in Subic, Zambales; and that being a PEZA registered enterprise involved in ship repair activities, you are enjoying an income tax holiday of six (6) years which shall expire on February 2000 and by then, you shall be subject to the 5% preferential tax rate based on gross income earned. In connection therewith, you now request for a ruling as to whether or not interest income earned from your peso and Foreign Currency Deposit Unit (FCDU) deposits are subject to the 5% preferential tax rate based on gross income earned and not respectively to the 20% or 75% final withholding tax. In reply thereto, please be informed that under Section 24 of R.A. 7916, as amended by R.A. No. 8748, otherwise known as the "Special Economic Zone of 1995", as implemented by Revenue Regulations No. 12-97, and as further amended by Revenue Regulations No. 1-2000, businesses and enterprises within the ECOZONE as defined by Section 5 thereof shall. in lieu of paying local and national taxes, be liable to the payment of five percent (5%) preferential tax rate based on gross income earned, which shall be shared and distributed as follows: (a) To the National Government 3% (b) To the Treasurer's Officer of the Municipality or City where the registered enterprise is located 2% The aforementioned 5% preferential tax rate is in lieu of all the national and local taxes otherwise due from business and enterprises operating within the ECOZONE. Such being the case, your interest income derived from currency bank deposit and yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements and royalties from sources within the zone and the interest income you will derive from a depository bank under the expanded foreign currency deposit system, likewise within the zone, as prescribed in Section 27(D)(1) of the Tax Code of 1997 shall respectively be not subject to the 20% and 7.5% final withholding tax (BIR Ruling No. DA-270-99 dated May 07, 1999) but only to the 5% preferential tax rate based on the gross income earned. CacISA 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.) LILIAN B. HEFTI Deputy Commissioner Legal & Inspection Group