BIR Ruling [DA-738-06]

December 22, 2006 BIR RULING [DA-738-06] Sec. 57 (B); BIR Ruling No. DA-273-2006 Zacto Systems Philippines, Inc. Lot 5, Block 3, Meridian Industrial Complex Sta. Rosa, Laguna Attention: Vicente Quema Chief, Financial Officer Gentlemen : This refers to your letter dated March 9, 2006, requesting a Certificate of Tax Exemption for Zacto Systems Philippines, Inc. (ZACTO, for short) in view of its income tax holiday granted by the Board of Investment. It could be ascertained from the documents submitted that ZACTO is a corporation organized and existing under the Philippine laws; that it was registered with the Securities and Exchange Commission on March 8, 2004 and likewise with the Board of Investments (BOI), as New Export Producer of Metal Furniture on a Non-Pioneer status under the Omnibus Investments Code of 1987 (E.O. # 226); and that it is entitled to an Income Tax Holiday for four (4) years pursuant to No. 5 (a) of the Specific Terms and Conditions accompanying its Certificate of Registration, viz: "5. The Firm shall be entitled to the following incentives: a) Income Tax Holiday (ITH) for a period of four (4) years from date of registration which is January 25, 2005." In reply, please be informed that under Section 2.57.5 (B) (2) of Revenue Regulations 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 made to persons enjoying exemption from payment of income taxes pursuant to the provisions of any law (general or special) like the Omnibus Investments Code of 1987. Accordingly, since ZACTO is a BOI-registered enterprise enjoying exemption from payment of income taxes pursuant to the provisions of Section 39 (a) (1) of the Omnibus Investments Code of 1987, income payments made by its local suppliers of goods shall not be subject to 2% expanded creditable withholding tax prescribed in Revenue Regulations No. 2-98, as amended. (BIR Ruling No. 189-2000 dated March 30, 2000) 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 ruling shall be considered null and void. cSaATC Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service