BIR Ruling [DA-602-06]

October 10, 2006 BIR RULING [DA-602-06] RR 8-2005; DA-390-2006 dtd 6/23/06 Cityland Herrera Tower, Inc . #98 V.A. Rufino cor. Valero St. Salcedo Village, Makati City Attention: Mr. Johann Gohoc President Gentlemen : This refers to your letter dated June 26, 2006, requesting certificate of exemption of the Condominium Corporation from the 25% withholding tax imposed under Revenue Regulations 8-2005. It is represented Cityland Herrera Tower Inc. (Cityland Herrera, for short) was granted in a previous ruling (S-30-022-2006 dated May 25, 2006) tax exemption from income tax and value-added tax; that it is a non-stock, non-profit condominium corporation organized to promote the best interests, as well as to safeguard the welfare of the unit owners and occupants of the condominium building by maintaining the building and its facilities, and adopting measures consistent with laws, to enhance and regulate the use and enjoyment by the occupants of said building facilities; that since Cityland Herrera is exempt from income tax, it is your opinion that the refund to Cityland Herrera by MERALCO of the excess utility payments is exempt from the withholding tax imposed under Revenue Regulations No. 8-2005. In reply, please be informed that Section 2.57.5(B)(2) of Revenue Regulations (RR) No. 2-98, as amended by RR Nos. 3-2004 and 8-2005, is explicit in its provisions that the expanded withholding tax does not apply to income payments to persons enjoying exemption from payment of income taxes pursuant to the provisions of any law, general or special. Cityland Herrera Tower, Inc. is an exempt corporation organized for mutual aid association as contemplated under Section 30 (C) of the Tax Code of 1997. As such, it is exempt from payment of income tax on income received by it as such organization (BIR Ruling No. S-30-22-2006 dated May 25, 2006) and consequently from the expanded withholding tax. Moreover, since the excess utility payments pertain to expense related to Cityland Herrera's registered activity, then the refund which will be received by Cityland Herrera is not subject to the 32% regular corporate income tax because Cityland Herrera is an exempt corporation under Section 30(C) of the Tax Code of 1997. AaHcIT In sum, the MERALCO refund to Cityland Herrera arising from the Supreme Court case of G.R. No. 141314 dated April 9, 2003 of the excess utility payments which were incurred and paid by Cityland Herrera as an exempt organization under Section 30(C) of the Tax Code of 1997, is exempt from the 32% regular corporate income tax, and consequently, from the 25% or 32% withholding tax imposed under RR No. 8-2005. 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.) JAMES H. ROLDAN Assistant Commissioner Legal Service