BIR Ruling [DA-501-06]

August 15, 2006 BIR RULING [DA-501-06] R.R. 2-98; DA-281-05 DataOne Asia (Philippines), Inc. 6th Floor, IBM Plaza Eastwood City Cyberpark E. Rodriguez Jr. Avenue Quezon City Attention: Ms. Hayley B. Pabatang Accounting & Finance Executive Gentlemen : This refers to your letter dated May 10, 2006 which was indorsed to this Office by the Chief, Withholding Tax Division, this Bureau, in an Indorsement dated May 29, 2006, relative to your request for exemption from withholding taxes. It is represented that DataOne Asia (Phils.), Inc. is a corporation duly organized and existing under Philippine laws; that it is duly registered with the Securities and Exchange Commission under SEC Registration No. A20017017; that DataOne Asia (Phils.), Inc. is engaged in the business of computer and data processing services and generally deals in and with systems, facilities equipment, devices, programs and software involving the processing, storage, movement, monitoring, delivery, retrieval of financial and internet-based information; that the company is registered with the Philippine Economic Zone Authority (PEZA) under Certificate of Registration No. 01-007-IT pursuant to the provisions of Republic Act No. 7916, as an Ecozone IT Enterprise at the Eastwood City, Cyberpark Special Economic Zone; and that a Registration Agreement had been executed between PEZA and DataOne Asia (Phils.), Inc. dated January 05, 2001 whereby DataOne Asia (Phils.), Inc. shall be entitled to the incentives granted to non-pioneer firms under R.A. No. 7916, as amended. In reply, please be informed that Section 2.57.5(B)(2) of Revenue Regulations No. 2-98, as amended, is explicit in its provisions that the expanded withholding tax does no apply to income payments to persons enjoying exemption from payment of income taxes pursuant to the provisions of any law, general or special. PEZA-registered enterprises are granted certain preferential tax treatment under Section 24 of Republic Act No. 7916 which provides that 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. Accordingly, since DataOne Asia (Phils.), Inc. is a PEZA-registered enterprise enjoying preferential tax rate, income payments made to it with respect to its registered activity shall not be subject to the expanded creditable withholding tax prescribed in Revenue Regulations No. 2-98, as amended. EcDSHT 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, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service