GHLSYS Philippines, Inc.

September 25, 2007 BIR RULING [DA-508-07] R.R. 14-2002 UN-310-95 GHLSYS Philippines, Inc. Unit 30A Rufino Pacific Tower 6784 Ayala Avenue, Makati City Attention: Mr. Ariel Prestoza Head, Administrative and Finance Gentlemen : This refers to your letter dated August 17, 2007 stating that your company, GHLSYS Philippines, Inc. is registered with the Board of Investment (BOI) on May 18, 2007, under Certificate of Registration No. 2007-086, as a New ICT Service Firm in the Field of Software Development for Payment Infrastructure System on a Pioneer Status. The BOI granted you six (6) years income tax holiday (ITH) from the start of your commercial operation in accordance with the provisions of the Omnibus Investments Code of 1987 (Executive Order No. 226). You are requesting for an opinion whether or not GHLSYS Philippines, Inc. is exempt from creditable withholding tax pursuant to Revenue Regulations (RR) No. 14-2002. DHEACI In reply, please be informed that under RR No. 14-2002, viz: "SEC. 4. Exemption from Withholding. Section 2.57.5 of Revenue Regulations No. 2-98 is hereby amended to read as follows: Section 2.57.5. Exemption from Withholding . The withholding of creditable withholding tax prescribed in these Regulations shall not apply to income payments made to the following. aATHES xxx xxx xxx (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 the following: (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. 7916, the Omnibus Investment Code of 1987 and R.A. 7227, as amended, respectively;" CTSDAI Accordingly, since GHLSYS Philippines, Inc. is a BOI-registered enterprise, enjoying exemption from the payment of income tax pursuant to the provisions of Sec. 39 (a) (1) of the Omnibus Investments Code of 1987 for a period of ten (10) years from May 18, 2007 or actual start of operations or selling, whichever is earlier, but in no case prior than the date of registration, this Office is of the opinion as it hereby holds, that it is exempt from the payment of creditable withholding tax imposed under RR No. 2-98 as amended by RR 14-2002 on income payments received by it during the aforementioned period with respect to its registered activity, subject however, to the condition that both the BOI General and Specific Terms and Conditions for the Grant of ITH are met during the said period. In addition, ITH is an exemption from income tax on income payments received by a company for the duration of the period indicated. Documentary stamp tax is not a tax on income but is in the nature of an "excise tax" ( CIR vs. Herald Lumber Co., 10 SCRA 372) imposed either upon the transaction or document. In view of the fact, that GHLSYS Philippines, Inc. enjoys an ITH at the time of its sales transaction, it is therefore exempt only from income tax but not to documentary stamp tax though its transaction refer to any of its registered activity. DTcHaA This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service