BIR Ruling [DA-681-99]

December 10, 1999 BIR RULING [DA-681-99] Benny De Guzman Warehousing Project c/o ITW Ampang Industries, Philippines., Inc. Laguna International Industrial Park, LIIP-PEZA Mamplasan, Bian, Laguna Attention: Mr . Nelson Sison Production Manager Gentlemen : This refers to your letter dated January 30, 1999, requesting in effect for a ruling that you are exempt from the payment of taxes as an ECOZONE Enterprise. cdll Documents submitted disclosed that Benny De Guzman Warehousing Project has been approved by the Philippine Economic Zone Authority (PEZA) Board as an ecozone facilities enterprises, specifically, to construct factory buildings for lease to registered ecozone enterprise at the Laguna International Industrial Park-SEPZ under Resolution No. 95-153 dated November 15, 1995; and that you are entitled to all incentives granted under Republic Act No. 7916, entitled "An Act Providing for the Legal Framework and Mechanisms for the Creation, Operation, Administration, and Coordination of Special Economic Zones in the Philippines, Creating for this Purpose, the Philippine Economic Zone Authority (PEZA), and for Other Purposes." In reply, please be informed that Section 24 of Republic Act No. 7916 provides: "SEC. 24. Exemption from Taxes under the National Internal Revenue Code . Any provision of existing laws, rules and regulations to the contrary notwithstanding, no taxes, local and national, shall be imposed on business establishments operating within the ECOZONE. In lieu of paying taxes, five percent (5%) of the gross income earned by all businesses and enterprises within the ECOZONE shall be remitted to the national government. This five percent (5%) shall be shared and distributed as follows: "(a) Three percent (3%) to the national government; cdlex "(b) One percent (1%) to the local government units affected by the declaration of the ECOZONE in proportion to their population, land area, and equal sharing factors; and "(c) One percent (1%) for the establishment of a development fund to be utilized for the development of municipalities outside and contiguous to each ECOZONE: . . ." Thus, as a business establishment operating within the ECOZONE, Benny De Guzman Warehousing Project shall, in lieu of paying local and national taxes, be subject to the payment of preferential tax rate of 5% based on its gross income earned within the ECOZONE which shall be remitted to the national government. Accordingly, since you are exempt from payment of national and local taxes, and in lieu of which, you are subject to the 5% tax based on the gross income earned as defined in Revenue Regulations No. 1-95, as amended by Revenue Regulations No. 12-97, this Office is therefore of the opinion as it hereby holds that you are exempt from the creditable expanded withholding tax pursuant to Section 2.57.5(B) of Revenue Regulations No. 2-98, implementing Section 57(B) of the Tax Code of 1997 on income payments received by your company from the lease of your factory buildings to registered ecozone enterprise at the Laguna International Industrial Park-SEPZ. 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. 163-94 dated December 2, 1994 and BIR Ruling No. DA-263-98 dated June 23, 1998). Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)