BIR Ruling [DA-499-03]

December 11, 2003 BIR RULING [DA-499-03] R.A. 7916; DA-263-98 Orient Goldcrest Realty Corporation First Cavite Industrial Estate (FCIE) Langkaan, Dasmarias, Cavite Attention: Mr. Wellington G. Ong President Gentlemen : This refers to your letter dated November 22, 2002 requesting exemption from the expanded five percent (5%) withholding tax and value added tax. It is represented that Orient Goldcrest Realty Corporation (Orient) is registered with the Philippine Economic Zone Authority (PEZA) as an Ecozone Facilities Enterprise and avails of the exemption from national and local taxes in lieu of the five percent (5%) special tax on gross income earned in accordance with Section 24 of Republic Act No. 7916, as amended. In reply, please be informed that Section 24 of R.A. No. 7916 provides: "SEC. 24. Exemption from Taxes Under the National Internal Revenue Code . Any provision of existing laws, rules and regulations to the contrary notwithstanding, no taxes, local and 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 and enterprises within the ECOZONE shall be remitted to the national government. This five percent (5%) shall be shared and distributed as follows: "(a) Three percent (3%) to the national government; "(b) One percent (1%) to the local government units affected by the declaration of the ECOZONE in proportion to their population, land area, and equal sharing factors; and "(c) One percent (1%) for the establishment of a development fund to be utilized for the development of municipalities outside and contiguous to each ECOZONE: . . ." Accordingly, as a business establishment operating within the ECOZONE, Orient shall, in lieu of paying local and national taxes, be subject to the payment of the preferential tax rate of 5% based on its gross income earned within the ECOZONE which shall be remitted to the national government. (BIR Ruling No. DA-263-98 dated June 23, 1998) cDAISC This ruling is 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, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group