Mahle Filter Systems Philippines Corporation

July 31, 2009 BIR RULING [DA-(C-164) 429-09] Sec. 29; RR 2-01 Mahle Filter Systems Philippines Corporation Block 8 Lots 5, 6, & 7 PEZA Drive First Cavite Industrial Estate Brgy. Langkaan, Dasmarias Cavite Attention: Eleonor F. Ledesma Department Head General Accounting and Tax Gentlemen : This refers to your letter dated June 8, 2009 requesting for a clarification of BIR Ruling DA (C-094) 305-2009 dated June 17, 2009 relative to the exemption of Mahle Filter Systems Philippines Corporation ("MFSP") from improperly accumulated earnings tax ("IAET"). It is represented that MFSP was issued the aforementioned BIR ruling confirming its exemption from IAET on the ground that it is a PEZA-registered enterprise pursuant to the provisions of Section 4 of Revenue Regulations 2-01; that MFSP is currently enjoying the preferential tax rate of 5% on its gross income; and that prior to availing itself of this incentive, MFSP was enjoying income tax holiday (ITH) pursuant to the provisions of Executive Order 226. You now seek clarification as to whether the ruling exempting MFSP from IAET is applicable at the time that MFSP was enjoying the ITH incentive. In reply, please be informed that in BIR Ruling DA-059-03 dated February 28, 2003 this Office had to occasion to rule that a PEZA-registered enterprise enjoying the ITH incentive is not subject to IAET notwithstanding that the company has accumulated retained earnings for the period that it was on ITH. Applying the foregoing, since MFSP is a PEZA registered enterprise, this Office hereby reiterates its ruling that it is exempt from payment of the IAET under Section 4 of RR No. 2-2001 implementing Section 29 of the Tax Code of 1997 even if it is shown that it has accumulated retained earnings for the period it was on ITH. 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, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service