Exemption from the Expanded Withholding Tax

February 19, 1989 BIR RULING NO. 019-89 24 000-00 019-89 Gentlemen : This refers to your letter dated December 5, 1988 stating that your company, Electronic Assemblies, Inc., has been duly registered with the Board of Investments in accordance with the provisions of Executive Order No. 226 otherwise known as the Omnibus Investments Code of 1987; and that your company is entitled, among others, to an income tax holiday for four (4) years from start of commercial operation. cdtech Based on the foregoing representations, you now request a ruling to the effect that you are exempt from the expanded withholding tax. In reply, please be informed that Article 39(a)(1), Title III of Executive Order No. 226 otherwise known as the Omnibus Investment Code of 1987 provides; viz: "Art. 39. Incentives to Registered Enterprises : All registered enterprises shall be granted the following incentives to the extent engaged in a preferred area of investment: (a) Income Tax Holiday (b) For six (6) years from commercial operation for pioneer firms and four (4) years for non-pioneer firms, new registered firms shall be fully exempt from income taxes levied by the National Government ...." Such being the case, and since you are registered with the Board of Investments as a new producer with the status of a non-pioneer enterprise you are exempt from income tax for four (4) years from the start of your commercial operation in April 1988 but not earlier than your date of registration on April 14, 1988. Accordingly, income payments to you within the said period are not subject to the expanded withholding tax prescribed by Section 50(b) of the Tax Code, [Sec. 4(b), Revenue Regulations No. 6-85]. Very truly yours, (SGD.) JOSE U. ONG Commissioner