BIR Ruling [DA-665-99]

December 2, 1999 BIR RULING [DA-665-99] Royal Port Services, Inc . Bldg. 8362, Boton Wharf Subic Bay Freeport Zone Attention: Mr . Rudi Yark General Manager Gentlemen : This refers to your letter dated January 20, 1999, requesting exemption from the 1% creditable withholding tax on income payments to you for rental and cargo handling services within the Subic Bay Freeport Zone. Documents submitted disclosed that Royal Port Services, Inc . (RPSI) is a Subic Bay Freeport Enterprise, that it is engaged in the business of cargo handling (arrastre and stevedoring) within the Subic Bay Freeport Zone; that it is a VAT Exempt enterprise under Republic Act No. 7227 otherwise known as the Bases Conversion Development Act under Tax Identification No. 003-980-814; and that it was granted a Certificate of Registration and Tax Exemption under Subic Bay Freeport Enterprise Certificate No. 96-0026 dated September 1, 1998. In reply, please be informed that Section 4(b) of Revenue Regulations No. 6-85, as amended by 12-94, is explicit in its provisions that the withholding tax therein prescribed shall not apply to "income payments to persons enjoying exemption from payment of income taxes pursuant to the provisions of any law, general or special . . ." Pursuant to Section 12(c) of R.A. No. 7227, otherwise known as the Bases Conversion Development Act of 1992, RPSI shall be liable to the payment of the preferential rate of 3% plus the amounts equivalent to 1% for Local Government Units and 1% for Special Development Fund, based on its gross income earned, in lieu of local and national internal revenue taxes . (Emphasis supplied) Such being the case, and since RSPI is a Subic Bay Freeport Enterprise, its income from rental and cargo handling services within the Subic Bay Freeport Zone is subject to the 5% preferential tax rate under R.A. No. 7227 in lieu of income tax under the Tax Code of 1997, and consequently exempt from the 5% and 1% withholding tax imposed under Section 2.57.2(C) and (E)(4)(c), respectively, of Revenue Regulations No. 2-98. This serves as your certification that income payments made to RSPI from its rental and cargo handling services within the Subic Bay Freeport Zone are not subject to the expanded withholding tax. 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. (BIR Ruling No. DA-046-97 dated January 30, 1997) Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)