BIR Ruling [DA-497-98]

November 16, 1998 BIR RULING [DA-497-98] Indo Phil Cotton Mills, Inc. 15th Flr., JAKA 6780 Ayala Avenue, Makati City Attention: B . L . GUPTA Senior Finance Manager Gentlemen : This refers to your letter dated April 16, 1998 requesting for a certificate of exemption from the creditable withholding tax imposed under Revenue Regulations No. 6-85, as amended by Revenue Regulations No. 12-94, on the ground that you suffered net operating losses during the last two (2) taxable years ended December 31, 1996 and December 31, 1997. Documents submitted show that per your audited financial statements for the calendar years ended December 31, 1996 and December 31, 1997 you suffered losses in the amounts of P38,089,386.52 and P76,650,352.24 respectively. In reply, please be informed that Section 3 of Revenue Regulations No. 12-94, amending Revenue Regulations No. 6-85, otherwise known as the "Expanded Withholding Tax Regulations", prior to its amendment by Revenue Regulations No. 2-98 on April 17, 1998 provides that "SEC. 3. Section 4 of Revenue Regulations No. 6-85 is hereby amended to read as follows: "SEC. 4. Exemption from Withholding . The withholding of the tax prescribed in these regulations shall not apply to income payments in the following cases: xxx xxx xxx "(d) In the case of a payee who suffered net operating losses during the immediately preceding two (2) tax years; xxx xxx xxx" It is emphasized herein that the aforesaid exemption from the creditable withholding tax is no longer included under Section 2.57.5 of Revenue Regulations No. 2-98, the new regulations relative to the Withholding on Income subject to the Expanded Withholding Tax and Final Withholding Tax, Withholding of Creditable Value-Added Tax and Other Percentage Taxes. However, Revenue Regulations No. 2-98 was published in the newspapers on May 9, 1998 and took effect fifteen (15) days thereafter or on May 24, 1998. Hence, all applications for exemption from the creditable withholding tax based on the "2-year operating loss" filed with this Office on or before May 24, 1998 are still covered by Revenue Regulations No. 12-94. Such being the case, and since you have incurred net operating losses during the years 1996 and 1997, you are exempt from the creditable withholding tax prescribed under Revenue Regulations No. 6-85, as amended by Revenue Regulations No. 12-94, for the year 1998. (BIR Ruling No. 126-94 dated August 15, 1994). 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. casia Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)