Whether the Input tax Credits Generated in the Purchases and Exportation of Silver can be Deducted against VAT Liability

February 13, 1995 BIR RULING NO. 020-95 50 (b) 000-00 020-95 Precision Engineered Components Corporation Main Ave. cor. Binary Street Special Export Processing Zone Light Industry & Science Park of the Philippines Bo. Diezmo, Cabuyao, Laguna Attention: Mr . Wilfredo B . Onal Accounting Manager Gentlemen : This refers to your letter dated June 28, 1994 stating that Precision Engineered Components Corporation (PECCO) is registered with the Export Processing Zone Authority (EPZA) under the Omnibus Investments Code of 1987 as pioneer enterprise for the production of component parts for floppy disk drive and other parts and camera assembly; and that as a registered enterprise, the company is entitled to certain tax benefits and non-tax incentives such as income tax holiday for six (6) years from the start of commercial operation and other incentives. Based on the foregoing representations, you are now requesting exemption from the payment of the 1% creditable withholding tax prescribed under Revenue Regulations No. 12-94. In reply, please be informed that under Section 4(b)(2) of Revenue Regulations No. 6-85, as amended by Revenue Regulations No. 12-94, implementing Section 50(b) of the Tax Code, as amended, the withholding tax prescribed in the Regulations shall not apply to income payments to persons enjoying exemption from payment of income taxes pursuant to the provisions of the Omnibus Investment Code of 1987, as amended. Accordingly, and since your are registered with EPZA and enjoying exemption from the payment of income taxes for a period of six (6) years reckoned from the start of commercial operation in accordance with the provisions of the Omnibus Investments Code of 1987, this Office is of the opinion, as it hereby holds, that you are exempt from the payment of the creditable withholding tax imposed under Revenue Regulations No. 6-85, as amended by Revenue Regulations No. 12-94, on income payments received by your company during the aforementioned period. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue