BIR Ruling [DA-554-98]

December 4, 1998 BIR RULING [DA-554-98] Laya Mananghaya & Co. 22/F Antel 1000 Center 139 Valero St., Salcedo Village Makati City Attention: Atty . Mariano C . Ereso Gentlemen : This refers to your letter dated March 3, 1998 stating that your client, Hardie Jardine, Inc. (formerly known as Jardine James Hardie Philippines Co., Inc. (JHPI]) is a corporation organized and registered under Philippine laws engaged in the production of fiber cement boards; that it is registered with the Board of Investments (BOI) under Certificate of Registration No. DP95-406 having a preferred pioneer status that entitles it to an income tax holiday for six (6) years commencing April 1999 or actual start of commercial operation whichever comes first as stated in the Specific Terms and Conditions for the grant of its BOI registration; that from calendar year 1996 and the interim period from January to March 1997 prior to its change in accounting period, from calendar year to fiscal year ending March 31, it had no commercial operations; that during the fiscal year ending March 31, 1998 it incurred a net operating loss; that for the fiscal year ending March 31, 1999 it is expected to incur a larger net operating loss due to the huge expenses being incurred for the construction of its plants and importation of fiber cement boards for sale in the domestic market, prior to actual production of locally produced fiber cement boards. aisadc Based on the foregoing, you are requesting for a certificate of exemption from the expanded withholding tax under Revenue Regulations No. 6-85, as amended by Revenue Regulations No. 12-94. In reply, please be informed that Revenue Regulations No. 2-98 dated April 17, 1998 which implements Republic Act No. 8424 pertaining to the withholding of tax on income which was promulgated specifically to govern the collection at source on income paid on or after January 1, 1998 provides as follows: "SEC. 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: (A) . . .; (B) Person enjoying exemption from the 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 registered with the Board of Investments and enjoying exemption from the income tax provided by Republic Act No. 7916 and the Omnibus Investment Code of 1987; (3) . . .; Accordingly, since JHPI is a BOI registered enterprises enjoying an income tax holiday for six (6) years commencing April 1999, it is exempt from the collection at source of expanded withholding tax by its income payors pursuant to Section 2.57.2 (B)(2) of Revenue Regulations 2-98. 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. LLpr Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)