City & Land Mega Plaza, Inc.

August 20, 2008 BIR RULING [DA-(C-042) 156-08] RR 8-2005; DA-602-2006 City & Land Mega Plaza, Inc. ADB Avenue corner Garnet Road Ortigas Center, Pasig City Attention: Atty. Celso P. Ylagan II President Gentlemen : This refers to your letter dated March 8, 2006, requesting certificate of exemption from the 25% withholding tax imposed under Revenue Regulations No. 8-2005 in connection with the refund of the excess utility payments of City and Land Mega Plaza, Inc. from MERALCO. It is represented that City and Land Mega Plaza, Inc. is a non-stock, non-profit association; that it is registered with the Securities and Exchange Commission (SEC) under S.E.C. Reg. No. ANO95-004422 dated August 13, 1996; that its primary purpose is "to promote the best interest of the unit owner/s in the condominium by maintaining close cooperation with the Developer, City and Land Developers, Inc. and other property owners, businessman, and organizations in Pasig, Metro Manila, as well as with proper government authorities and agencies"; and that it never engaged in any trade or business. 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 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. aDIHCT City and Land Mega Plaza, 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 the 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 City and Land Mega Plaza, Inc. primary purposes, then the refund which will be received by City and Land Mega Plaza, Inc. is not subject to the 32% regular corporate income tax because City and Land Mega Plaza, Inc. is an exempt corporation under Section 30 (C) of the Tax Code of 1997. In sum, the MERALCO refund to City and Land Mega Plaza, Inc. 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 City and Land Mega Plaza, Inc. as an exempt organization under Section 30 (C) of the Tax Code of 1997 is exempt from the 32% (now 35%) regular corporate income tax, and consequently, from the 25% or 32% (now 35%) withholding tax imposed under RR No. 8-2005. ScHADI 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