BIR Ruling [DA-475-04]

September 9, 2004 BIR RULING [DA-475-04] SGV & Co. 6760 Ayala Avenue Makati City Attention: Atty. R.C. Vinzon Partner, Tax Division Gentlemen : This refers to your letter dated July 22, 2004 requesting confirmation of your opinion that the directors of Cypress Semiconductor Philippine Headquarters Ltd.-Regional Operating Headquarters (CSPHL-ROHQ) are entitled to the 15% preferential tax rate pursuant to Section 25(C) of the Tax Code of 1997 and Article 61 of the Omnibus Investments Code and its implementing rules and regulations. It is represented that (1) WW BE and SJ Support and Managing Director (2) Assembly and Test Manufacturing Subcon Director are entitled to the 15% preferential tax rate as provided for under Article 61 of the Omnibus Investments Code, as amended and Section 25(c) of the Tax Code of 1997; that the aforesaid directors are employed by CSPHL-ROHQ and perform services for the latter's client, which qualify as a regional operating headquarters; and that the nature of their jobs as can be seen in their job descriptions below, are managerial and technical, which clearly entitle them to the preferential tax rate, to wit: 1. WW BE and SJ Support Managing Director responsible in managing assembly/test operations, coordination with different subcontractors entities (local and Asia), Global Distribution Center (GDC), Global Help Desk (GHD), Engineering Information Systems (EIS), Regional Quality and Product Engineering that support WW BE operations, US product lines and reengineering, WW logistics, and IT and Regional Quality organization; 2. Assembly and Test Manufacturing Subcon Director responsible in managing total assembly and test manufacturing requirement of Back-End (Cypress Mfg. Ltd.), Subcon Management Entity, Asia Regional Outsource Planning, Operation, Engineering, Procurement and Quality. Manage assembly or test outsource factories to support best quality, delivery, yield and cost. Develop and implement a strategy for over all outsource manufacturing. In reply thereto, please be informed that this Office in BIR Ruling No. DA251-03 dated August 1, 2003 had already occasioned to rule on the matter, when it said that "SUCH BEING THE CASE, this Office confirms your opinion that directors and managers to be employed by CSPHL-ROHQ are deemed to occupy managerial and technical positions entitled to 15% preferential tax rate on their compensation and benefits as prescribed in Section 25(C) of the Tax Code of 1997 in relation to R.A. No. 8756." Considering that the above-named directors are indeed performing managerial and technical functions, they are entitled to the 15% preferential tax rate prescribed in Section 25(C) of the Tax Code of 1997 in relation to Article 61 of E.O. 226, otherwise known as the Omnibus Investments Code. IN VIEW OF THE FOREGOING, this Office hereby confirms your opinion that the above-described directors of CSPHL-ROHQ performing managerial and technical services are entitled to the 15% preferential tax rate prescribed in Section 25(C) of the Tax Code of 1997 and Article 61 of E.O. No. 226, otherwise known as the Omnibus Investments Code. THaAEC 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