MTE Precision Toolings, Inc.

June 16, 2009 BIR RULING [DA-(C-092) 301-09] RR 2-98, as amended; DA-015-08 dtd. 1/17/2008 MTE Precision Toolings, Inc. Lot C3-3a Building 6, Carmelray Industrial Park II Brgy. Punta, Calamba City, Laguna Attention: Wong Kok Chiu General Manager Gentlemen : This refers to your letter dated March 05, 2009, requesting for exemption from withholding tax on income payments to MTE Precision Toolings, Inc., a PEZA-registered enterprise. SEHaTC It is represented that MTE Precision Toolings, Inc. is duly organized corporation under the laws of the Republic of the Philippines; that it has been granted registration as an Ecozone Export Enterprise at the Carmelray Industrial Park II-Special Economic Zone with the Philippine Economic Zone Authority ("PEZA") under Certificate of Registration No. 08-04 dated January 30, 2008; that as a PEZA registered enterprise, it is exempt from paying all local and national taxes and is subject to a five (5%) percent special tax on gross income as defined under the implementing rules of Republic Act No. 7916, otherwise known as the Special Economic Zone Act of 1995; and that it is your opinion that all income of MTE Precision Toolings, Inc. is subject to the five (5%) percent tax on gross income, hence, income payments made to MTE Precision Toolings, Inc. is exempt from expanded withholding tax. In reply, please be informed that Section 2.57.5 (B) (2) of Revenue Regulations No. 2-98, as amended, is explicit in its provisions 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. PEZA-registered enterprises are granted certain preferential tax treatment under Section 24 of Republic Act No. 7916 which provides that 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. Accordingly, since MTE Precision Toolings, Inc. is a PEZA-registered enterprise enjoying preferential tax rate, income payments made to it with respect to its registered activity shall not be subject to expanded creditable withholding tax prescribed in Revenue Regulations No. 2-98, as amended. 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