Cebu Air, Incorporated

June 24, 2009 BIR RULING [DA-(IL-013) 319-09] RR 2-98; E.O. 226; DA-554-98 Cebu Air, Incorporated Airline Operations Center Manila Domestic Airport Pasay City Attention: Mr. Lance Y. Gokongwei President and CEO Gentlemen : This is with regard to your letter dated January 12, 2009 requesting a ruling for the exemption from expanded withholding tax of Cebu Air, Inc. TaIHEA Cebu Air, Inc., a local airline company operating under the trade name "Cebu Pacific" and was granted by the Board of Investments (BOI) with Certificates of Registration (CR) No. 2005-213 on December 14, 2005 and 2008-119 on June 4, 2008, as an operator of air transport on a non-pioneer status under the Omnibus Investments Code of 1987 (Executive Order 226). Under the terms of its registrations, the Company is entitled to certain fiscal and non-fiscal incentives which include an Income Tax Holiday (ITH) for a period of four (4) years beginning January 2007 for BOI C.R. No. 2005-213 and beginning January 2010 for BOI C.R. No. 2008-119. Revenue Regulations No. 2-98, implementing Section 57 (B) of the Tax Code of 1997, provides: SEC. 2.57.5. Exemption from Withholding. The withholding of creditable withholding tax prescribed in these Regulations shall not apply to income payments made to the following : DTAESI (A) National government and its instrumentalities, including provincial, city or municipal governments; (B) Persons enjoying exemption from payment of income taxes pursuant to the provisions of any law, general or special, such as but not limited to the following: (1) Sales of real property by a corporation which is registered with and certified by the Housing and Land Use Regulatory Board (HLURB) or HUDCC as engaged in socialized housing project where the selling price of the house and lot or only the lot does not exceed one hundred eighty thousand pesos (P180,000) in Metro Manila and other highly urbanized areas and one hundred fifty thousand pesos (P150,000) in other areas or such adjusted amount of selling price for socialized housing as may later be determined and adopted by the HLURB, as provided under Republic Act No. 7279 and its implementing regulations; ASHaTc (2) Corporations registered with the Board of Investments and enjoying exemption from the income tax provided by Republic Act No. 7916 and the Omnibus Investment Code of 1987 ; (3) Corporations which are exempt from the income tax under Sec. 30 of the NIRC, to wit: the Government Service Insurance System (GSIS), the Social Security System (SSS), the Philippine Health Insurance Corporation (PHIC), the Philippine Charity Sweepstakes Office (PCSO) and the Philippine Amusement and Gaming Corporation (PAGCOR); However, the income payments arising from any activity which is conducted for profit or income derived from real or personal property shall be subject to a withholding tax as prescribed in these regulations. STaHIC Thus, from the provision, since Cebu Air, Inc. is a BOI registered company enjoying an income tax holiday for four (4) years beginning January 2007 for BOI C.R. No. 2005-213 and beginning January 2010 for BOI C.R. No. 2008-119, it is not subject to expanded withholding tax for the said periods. This ruling is being issued on the basis of the foregoing facts as presented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. aCTHDA Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service