Operation of Republic Act No. 4086 Relative to the Textile Industry

February 21, 1966 BIR RULING NO. 008-66 Ramie Textile, Inc. P. O. Box 183, Manila Attention : Mr . Alfonso Gonzales Chief Accountant Gentlemen : This refers to your letters dated May 28 and October 13, 1965 requesting information as to the operation of Republic Act No. 4086 relative to the textile industry. LLphil The pertinent provisions of Republic Act No. 4086 are quoted as follows: "SECTION 1. Any provision of existing law to the contrary notwithstanding, the importation of natural and synthetic raw fibers and tow, chemicals, dyestuffs and spare parts, as well as the manufacture and sale of finished products thereof, by the textile industry in the spinning, weaving and finishing of raw fibers into yarn, thread, grey cloth and finished fabric, shall be free of duties, special import tax, sales and/or compensating tax, subject to the following conditions, all of which must concur: xxx xxx xxx "SECTION 2. Period of Non-Payment of Duties and Taxes . Any person, partnership, company or corporation covered by this Act shall be excluded from the payment of duties and taxes as follows: "(a) One hundred per centum of the taxes and duties due during the period from the date of the approval of this Act up to December thirty-first, nineteen hundred sixty-six; "(b) Seventy-five per centum of the taxes and duties due during the period from January first, nineteen hundred sixty-seven to December thirty-first, nineteen hundred sixty-eight; "(c) Fifty per centum of the taxes and duties due during the period from January first to December thirty-first, nineteen hundred sixty-nine; "(d) Twenty-five per centum of the taxes and duties due during the period from January first, to December thirty-first, nineteen hundred seventy; "(e) On or after January first, nineteen hundred seventy-one all taxes and duties shall be paid in full. "SECTION 4. All textile manufacturers who register under this Act shall, in lieu of the taxes herein exempted, be assessed and shall pay a special tax of one per centum of their gross sales as defined by the National Internal Revenue Code, to be paid in the same manner and at the same time and subject to the same penalties and surcharges as the sales tax, which shall constitute a Special Textile Research Fund, to be disposed of and disbursed by the National Science Development Board for research, experiment and study in such projects as, in its judgment, will contribute to the local growth, production or manufacture of raw materials needed by the industry; and to the improvement or invention of machinery equipment processes or production methods for the industry." In answer to the question posed by you, I have the honor to inform you as follows: 1. The 1% special tax imposed by Section 4 of Republic Act 4086 is based on gross sales, including both local and export. The gross sales include sales of mills wastes. 2. The 1% special tax shall continue for the duration of the exemption provided for by section 2 of the law, that is from June 18, 1964 to December 31, 1970. As stated in No. 1 above, the basis of the 1% tax shall likewise remain for the duration of aforesaid period. 3. During the period of partial exemption, the sales tax (in contradistinction and in addition to the 1% special tax) payable is arrived at by first computing the sales tax due as if there is no exemption. From the amount thus computed the prevailing partial exemption is deducted and the difference constitutes the sales tax payable. Example: Period Normal sales Partial Sales tax tax exemption payable Jan. 1, 1967 to Dec. 31, 1968 P100.00 75% (P75.00) P25.00 Jan. 1, 1969 to Dec. 31, 1969 " 50% (P50.00) P50.00 Jan. 1, 1970 to Dec. 31, 1970 " 25% (P25.00) P75.00 Beginning Jan. 1 1971 up " 0% (P 0.00) P100.00 4. Beginning January 1, 1971, the 1% special tax shall no longer be due and payable. 5. The rule of computing the partial exemption as stated in No. 3 above, is not applicable when the articles manufactured are exported abroad pursuant to Section 188(e) of the Tax Code. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue