BIR Ruling [DA-570-98]

December 21, 1998 BIR RULING [DA-570-98] Canlubang Spinning Mills, Inc. Suite 1122-1123 Tytana Building Plaza Lorenzo Ruiz, cor. Oriente Street Binondo, Manila Attention: Mr . Victor Ongking President Gentlemen : This refers to your letter dated April 16, 1998 requesting for a renewal of exemption from the payment of the expanded withholding tax imposed under Revenue Regulations No. 12-94 on the ground that your company continued to sustain operating losses for the years 1996 and 1997. casia Documents submitted disclosed that your company, Canlubang Spinning Mills, Inc., incurred net operating losses for the years 1996 and 1997 as shown in your Financial Statements, particularly, the Statement of Income and Retained Earnings; that for the years 1996 and 1997, you have incurred net operating losses in the amount of P9,639,052.90 and P4,037,423.11, respectively. In reply, please be informed that Section 3 of Revenue Regulations 12-94 amending Section 4 of Revenue Regulations No. 6-85, otherwise known as the "Expanded Withholding Tax Regulations", 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 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) years; xxx xxx xxx" It is emphasized herein that the aforesaid exemption from the creditable withholding tax is no longer included 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, 1997 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 you have incurred net operating losses during the years 1996 and 1997, you are 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 Nos. 126-94 dated August 15, 1994; DA-206-98 dated May 22, 1998; DA-256-97 dated July 31, 1997) 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 as null and void. Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)