BIR Ruling [DA-439-00]

December 27, 2000 BIR RULING [DA-439-00] RR 2-98 34-98 SGV & Co. 6760 Ayala Avenue 1226 Makati City Attention: Atty . Joel L . Tan-Torres Partner, Tax Division Gentlemen : This refers to your letter dated October 24, 2000 requesting for a ruling in behalf of your client, Bataan Polyethylene Corporation (BPC), to the effect that BPC is not subject to the one percent (1%) withholding tax under its income tax holiday incentive. It is represented that BPC is a domestic corporation duly registered with the Board of Investments as a New Domestic Producer of Polyethylene Resins on a Preferred Pioneer Status under Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987; that as a BOI-registered enterprise on a pioneer status, BPC is entitled to, among others, a six (6)-year income tax holiday incentive starting June 1999; and that BPC manufactures polyethylene resins and sells the same to local customers, some of which are top 5,000 corporations. aCITEH In reply, please be informed that Section 2.57.5(B)(2) of Revenue Regulations No. 2-98 implementing Section 57(B) of the Tax Code of 1997 is explicit that the withholding of creditable withholding tax does not apply to income payments to persons enjoying exemption from payment of income taxes pursuant to the Omnibus Investments Code of 1997. BOI-registered enterprises enjoy exemption from payment of income taxes pursuant to the provisions of Section 39(a)(1) of the Omnibus Investment Code of 1987, such as the income tax holiday. Accordingly, since Bataan Polyethylene Corporation is a BOI-registered enterprise, enjoying exemption from the payment of income taxes under Section 39(a)(1) of the Omnibus Investments Code of 1987, for a period of six (6) years from start of commercial operation in December 1998 or actual start of commercial operation whichever comes first, but not earlier than the date of registration, income payments made by any of the top 5,000 corporation shall be exempt from the 1% creditable withholding tax imposed under Section 2.57.2(M) of Revenue Regulations No. 2-98 pursuant to Sec. 2.57.5(B)(2) of the same regulations. (BIR Ruling No. DA-34-98 dated February 3, 1998) 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. CTDacA Very truly yours, Commissioner of Internal Revenue By: (SGD.) LILIAN B. HEFTI Deputy Commissioner Legal and Inspection Group