Powergear, Inc.

July 7, 2009 BIR RULING [DA-(OSL-023) 355-09] RA 9178; DA-537-2007 Powergear, Inc. Unit 19 IEI Business Center, Alabang Zapote Road, Almanza 1 Las Pias Attention: Ms. Ma. Victoria P. Laplana Corporate Secretary & Treasurer Gentlemen : This refers to your letter dated February 23, 2009 requesting exemption from taxes pursuant to the provisions of the Barangay Micro Business Enterprise Law in connection with your sales to your clients. It is represented that pursuant to Republic Act (R.A.) No. 9178, otherwise known as "An Act to Promote the Establishment of Barangay Micro Business Enterprises, Providing Incentives and Benefits Therefor, and for other Purposes", Powergear, Inc. with TIN 230-338-434-000 was awarded the Certificate of Authority for Barangay Micro-Business Enterprise last October 30, 2008 entitling it to all benefits and incentives subject to the terms and conditions set forth in the said law, which will expire on July 21, 2010. In reply, please be informed that Sections 3 (a) and 7 of R.A. 9178 provides, viz. : "SEC. 3 Definition of Terms. As used in the Act, the following terms shall mean: (a) "Barangay Micro Business Enterprise", hereinafter referred to as BMBE, refers to any business entity or enterprise engaged in the production, processing or manufacturing of products or commodities, including agro-processing, trading and services, whose total assets including those arising from loans but exclusive of the land on which the particular business entity's office, plant and equipment are situated, shall not be more than Three Million Pesos (P3,000,000.00). The definition shall be subject to review and upward adjustment by the SMED Council, as mandated under Republic Act No. 6977, as amended by Republic Act No. 8289. xxx xxx xxx "SEC. 7. Exemption from Taxes and Fees . All BMBEs shall be exempt from income tax for income arising from the operations of the enterprise. The LGUs are encouraged either to reduce the amount of local taxes, fees and charges imposed or to exempt the BMBEs from local taxes, fees and charges." SIaHDA Inasmuch as POWERGEAR, INC. is a registered BMBE and was awarded BMBE Certificate of Authority by the City of Las Pias, it is therefore exempt from the payment of income tax and from the 1% withholding tax for income arising from the operations of the enterprise for a period of two (2) years or until July 21, 2010. 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