BIR Ruling [DA-472-03]

December 10, 2003 BIR RULING [DA-472-03] Revenue Regulations No. 2-98 DA Nos. 224-01 dated October 29, 2001; 072-98 dated March 11, 1998 Puno and Puno 12th Floor East Tower Philippine Stock Exchange Centre Exchange Road, Ortigas Center Pasig City Attention: Atty. Rosella Puno Mapa and Atty. Karen Camacho Paredes Gentlemen : This refers to your letter dated March 24, 2000 requesting on behalf of your client, Panay Power Corporation (PPC), for a ruling that income payments made to PPC during the period of its income tax holiday incentive are not subject to creditable withholding tax under Revenue Regulations No. 2-98, as amended by Revenue Regulations No. 14-2002. It is represented that PPC is a domestic corporation duly registered with the Securities and Exchange Commission (SEC) with principal office address at the 3rd Floor, Benpres Building, Exchange Road, Ortigas Center, Pasig City; that on July 22, 1997, PPC was registered with the Board of Investments (BOI) as a new operator of 50MW Bunker-C Power Generating Plant on a preferred pioneer status under the Omnibus Investments Code of 1987 (Executive Order No. 226), PPC was granted an income tax holiday (ITH) for six (6) years commencing from April 1999 or at the start of commercial operations, whichever comes first; that PPC filed a request with the BOI for an extension to start commercial operations and move its ITH reckoning date from April 1999 to July 2000; that the BOI granted the request of PPC to defer the start of its commercial operations and ITH reckoning date to July 2000; and that an appropriate annotation was made on the company's certificate of registration issued by the BOI. In reply thereto, please be informed that under Section 2.57.5(B)(2) of Revenue Regulations No. 2-98, as amended, implementing Section 57(B) of the Tax Code of 1997, the withholding tax prescribed in the said regulations shall not apply to income payments to persons enjoying exemption from the income tax provided by Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987. (BIR Ruling No. DA072-98 dated March 11, 1998; DA224-01 dated October 29, 2001) Corollarily, Section 4 of Revenue Regulations No. 14-2002 amending Section 2.57.5(B)(2) of Revenue Regulations No. 2-98 provides: "Sec. 2.57.5. Exemption from Withholding . The withholding of creditable withholding tax prescribed in these regulations shall not apply to income payments to: "(B) Persons enjoying exemption from payment of income taxes pursuant to the provisions of any law, general or special, such as but not limited to: "(1) . . . "(2) Corporations duly registered with the Board of Investments, Philippine Export Processing Zones and Subic Bay Metropolitan Authority enjoying exemption from income tax pursuant to E.O. 226, as amended, R.A. No. 7916, the Omnibus Investment Code of 1987 and R.A. 7227, as amended." Accordingly, since PPC is a BOI-registered enterprise enjoying exemption from the payment of income tax pursuant to Section 39(a)(1) of the Omnibus Investments Code of 1987 for a period of six (6) years reckoned from July 2000, this Office holds that income payments made to PPC are exempt from the payment of the creditable withholding tax under Revenue Regulations No. 2-98, as amended. CacTSI 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, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group