BIR Ruling [DA-523-98]

November 25, 1998 BIR RULING [DA-523-98] Atty. Francisco S. Serrano Phoenix Building 33 Kamuning Road Quezon City, Metro Manila S i r : This refers to your letter dated March 9, 1998 requesting on behalf of your client, CHINATOWN STEEL TOWERS, INC., 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 your client suffered net operating losses during the last two (2) taxable years ended December 31, 1996 and December 31, 1997. Documents submitted show that per audited financial statements for the calendar years ended December 31, 1996 and December 31, 1997, Chinatown Steel Towers, Inc., suffered net losses in the amounts of P4,406,898.00 and P2,157,193.00 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 your client, Chinatown-Steel Towers, Inc. has incurred net operating losses during the years 1996 and 1997, it is 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). aisadc 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.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal & Enforcement Group