Tax Exemptions Enjoyed by PHILCOMSAT Are Not Withdrawn by PD 1955

February 27, 1985 BIR RULING NO. 031-85 267 000-00 031-85 Gentlemen : This refers to your letter dated November 6, 1984 requesting confirmation of your opinion that the tax exemptions enjoyed by PHILCOMSAT under Republic Act No. 5514, as restored by Presidential Decree No. 990, subsist and are not withdrawn by Presidential Decree No. 1955. cdta Documentary evidence submitted shows that PHILCOMSAT is a grantee of a legislative franchise under Republic Act No. 5514 effective June 21, 1969, to establish and operate ground satellite facilities and delivery to common carriers; that under Section 8 of said Act, payment of 5% franchise tax on all gross receipts of its satellite transmission business transacted under the franchise shall be in lieu of all other taxes, and that from the time it was organized and for the duration of its franchise, it shall be exempt from the payment of customs duties, tariffs, and charges on machineries, equipment, supplies and space parts that shall be imported for the construction and maintenance of the permanent earth station or stations; that Presidential Decree No. 990 issued on August 31, 1976, restored all tax exemptions granted under Republic Act No. 5514 including those which were abrogated by Presidential Decree No. 34. In reply thereto, please be informed that your opinion is hereby confirmed. Ministry Order No. 35-84 provides that the withdrawal of tax exemption under P.D. No. 1955 does not affect "those covered by the non-impairment clause of the Constitution such as franchises ". (Emphasis Ours) Moreover, Section 1 of Ministry Order No. 39-84 implementing P.D. No. 1955 provides, thus: "Sec. 1. The withdrawal of exemption from, or any preferential treatment in the payment of duties, taxes, fees, imposts and other charges, as provided for under Presidential Decree No. 1955 does not apply to exemptions or preferential treatment embodied in the following laws: "a. The National Internal Revenue Code, as amended; xxx xxx xxx Section 267 of the National Internal Revenue, as amended, provides that "there shall be collected in respect to all franchises, upon the gross receipts from the business covered by the law granting the franchise, a tax of five per centum or such taxes, charges and percentages as are specified in the special charters of the grantees upon whom such franchises are conferred, whichever is higher, unless the provisions thereof preclude the imposition of a higher tax . . . ." The 5% franchise tax is the same rate provided under your Charter and the Tax Code, so that being a preferential tax treatment embodied under latter or the National Revenue Code, such treatment shall continue to be observed by this Office pursuant to the aforequoted provisions of Finance Ministry Order No. 39-84. cdti However, any exemption from or preferential treatment in the tax on interest income from bank deposits and yield or any other monetary benefit from deposit substitutes, trust fund and other similar arrangements shall remain withdrawn pursuant to Sections 24(cc) and 53(d)(1) of the National Internal Revenue Code, as amended by P.D. No. 1959. (Section 2, Ministry Order No. 39-84 effective October 15, 1984) Accordingly, Philcomsat is subject to 15% final withholding tax on its interest income from bank deposits and yield from deposit substitutes prescribed by Presidential Decree No. 1959. Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner