BIR Ruling [DA-434-00]

December 18, 2000 BIR RULING [DA-434-00] 57 (B); R.R. #2-98 DA-018-97 Philippine Advance Molder Corporation Phase IV, Block 16, CEZ Rosario, Cavite Attention: Mr . Isao Ramura President Gentlemen : This refers to your letter dated February 26, 1997 requesting an opinion on the exemption from the withholding and remittance of the 1% creditable withholding tax on income payments made to local sellers or subcontractors. Documents submitted show that Philippine Advance Molder Corporation is a domestic corporation duly registered with the Securities and Exchange Commission under SEC Registration No. AS095-009591; and it is likewise registered with the Philippine Economic Zone Authority pursuant to the provision of R.A. No. 7916 as an Ecozone Export Enterprise at the Special Economic Zone at Rosario, Cavite (Cavite Export Processing Zone) under Certificate of Registration No. 95-103. 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 of tax prescribed in these regulations shall not apply to income payments to persons enjoying tax exemption from the payment of income taxes pursuant to the provisions of any law, general or special, such as but not limited to, among others, corporations registered with the Board of Investments and enjoying exemption from income tax prescribed by Republic Act-No. 7916 and the Omnibus Investments Code of 1987. In connection therewith, under Section 24 of R.A. No. 7916, otherwise known as the Special Economic Zone Act of 1995, no taxes, local or national, shall be imposed on business establishments operating within the ECOZONE. In lieu of paying taxes, five percent (5%) of the gross income earned by all businesses or enterprises within the ECOZONE shall be remitted to the National Government and to the local government units affected by and contiguous to the ECOZONE. Such being the case, and since you are a registered ECOZONE Export Enterprise enjoying income tax exemption, among others, pursuant to the provisions of Section 24 of R.A. No. 7916, income payments to you for local sales or subcontracts are exempt from the creditable expanded withholding tax imposed under Section 2.57.5 (B)(2) of Revenue Regulations No. 6-85 as amended by Revenue Regulations No. 12-94 and further amended by Revenue Regulations No. 2-98. 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. aSEDHC Very truly yours, (SGD.) LILIAN B. HEFTI Deputy Commissioner Legal & Inspection Group