BIR Ruling [DA-575-98]

December 24, 1998 BIR RULING [DA-575-98] National Development Co. NDC Building 116 Tordesillas Street Salcedo Village Makati City Attention: Mr . Esmeraldo E . Sioson Assistant General Manager Gentlemen : This refers to your letter dated June 4, 1997 requesting for a ruling as to whether or not the National Development Company (NDC) is among those exempted from the payment of the 10% overseas communication tax under Section 118(b)(i) of the Tax Code, as amended (now Section 120 (B)(1) of the Tax Code of 1997). casia It is represented that NDC is a government-owned and controlled corporation created by Commonwealth Act No. 182 and its charter is embodied in PD No. 1648, as amended by PD No. 1846. In reply, please be informed that Section 120(B)(1) of the Tax Code of 1997 (formerly Section 118(b)(i), of the Tax Code, as amended) states that the 10% overseas communication tax shall not apply, among others, to the Government of the Republic of the Philippines or any of its political subdivisions or instrumentalities. A government instrumentality is a corporation owned and controlled by the government to promote certain aspects of the economic life of the people. (Gonzales vs. Hechanova, 9 SCRA 250) It is also defined as an "agency of the National Government, not integrated within the department framework, vested with special function or jurisdiction by law, endowed with some if not all corporate powers, administering special funds and enjoying operational autonomy, usually a charter. This term includes regulatory agencies, chartered institution and government-owned or controlled corporation." (Executive Order No. 292, otherwise known as the Administrative Code of 1987) As represented and by virtue of its charter, the National Development Company falls within the definition of a government instrumentality having been created to serve as an agency of the government in the furtherance of its economic policies (C.A. No. 182) and as a corporate vehicle of the government designed to pursue commercial, industrial, agricultural or mining ventures. (P.D. No. 1648, as amended by P.D. No. 1846) Accordingly, all payments made by that Office on outgoing telecommunications services in the exercise of its purely governmental functions are exempt from the 10% overseas communications tax imposed under Section 120(B)(1) of the Tax Code of 1997 (formerly Section 118(b)(i), of the Tax Code, as amended). (BIR Ruling No. 100-90 dated May 28, 1990) 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. cdta Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group