BIR Ruling [DA-649-04]

December 21, 2004 BIR RULING [DA-649-04] R.A. 7916 DA-116-2004 Arktech Philippines Incorporated Unit 2 Lot C2-4 Barangay Punta Carmelray Industrial Park II, Calamba City, Laguna Attention: Ms . Ma . Anylyn B . Miyakawa Administrative Manager Gentlemen : This refers to your letter dated August 23, 2004 requesting for exemption from the payment of creditable withholding tax. It is represented that Arktech Philippines Incorporated ("Arktech") is a PEZA registered Ecozone Export Enterprise with Registration Certificate No. 03-029 dated April 1, 2003 that is engaged in high precision processing of plates and various types of press and assembly works; that Arktech enjoys certain incentives granted to non-pioneer enterprises under Republic Act (RA) No. 7916, to wit: (1) Income Tax Holiday for four (4) years effective on the committed date of start of commercial operations, or the actual date of start of commercial operations which is September 2003; (2) tax and duty free importation of merchandise which include raw materials, capital equipment, machinery and spare parts; (3) exemption from wharfage dues and export tax, imposts or fees; (4) VAT zero rating of local purchases subject to compliance with BIR and PEZA requirements; and (5) exemption from payment of any and all local government imposts, fees, licenses or taxes except real estate tax, however, machineries installed and operated in the ecozone for manufacturing, processing, or for industrial purposes shall not be subject to payment of real estate taxes for the first three years of operation of such machineries, production equipment not attached to real estate shall be exempt from real property taxes. In reply, please be informed that under Section 2.57.5(B)(2) of Revenue Regulations (RR) No. 2-98, as amended, implementing Section 57(B) of the Tax Code of 1997, the withholding tax prescribed in the said Regulations shall not apply to income payments to persons enjoying exemption from income tax provided by RA 7916 otherwise known as "The Special Economic Zone Act of 1995" and the Omnibus Investments Code of 1987. Accordingly, since Arktech is a PEZA-registered enterprise, enjoying exemption from payment of income taxes pursuant to Rule XV, Section 6(A)(1)(b) of the Rules and Regulations implementing RA 7916, for a period of four (4) years reckoned from the date of actual start of its commercial operation, which is September 2003, this Office is of the opinion as it hereby holds, that it is exempt from the payment of the creditable withholding tax imposed under RR 2-98, as amended, on income payments received by it during the aforementioned period in connection with its registered activity. ( BIR Ruling No. DA-116-2004 dated March 15, 2004 ) cdll 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.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group