Taxpayers registered under R.A. 7156 Which Explicitly Grants Full Exemption from Income Tax to Minihydroelectric Power Developers for a Period of Seven (7) Years from Start of Commercial Operation are Exempt from Income Tax and Consequently from Creditable Expanded Withholding Tax

February 16, 1995 BIR RULING NO. 038-95 50 (b) R.A. 7156 000-00 038-95 Decierdo, Dicdican, Pacquiao, Libre, Paderanga & Morada Law Offices Aboitiz Complex Banilad, Cebu City Gentlemen : This refers to your letter dated May 18, 1994 stating that your clients, Hydro Electric Development Corporation and Northern Mini Hydro Corporation are both engaged in the business of developing potential sites for hydroelectric power in the Province of Benguet and Baguio City; that they have been registered as such pursuant to Republic Act No. 7156 otherwise known as "An Act Granting Incentives to Mini-Hydroelectric Power Developers and For Other Purposes" and its implementing regulations as evidenced by their respective Certificates of Registration both dated November 20, 1992; and that as such, your clients are entitled, among other things, to exemption from the payment of income for a period of seven (7) years from the start of their commercial operations. Based on the foregoing representations, you now request for a ruling to the effect that your clients are exempts from the expanded withholding tax. In reply, please be informed that Section 10, paragraphs 5 & 6 of R.A. 7156, provide, viz: "Sec. 10. Tax Incentives . Any person, natural or juridical, authorized to engage in minihydroelectric power development shall be granted the following tax incentives or privileges: "xxx xxx xxx "(5) Value-added Tax Exemption . Exemption from the ten-percent 10% value-added tax on the gross receipts derived from the electric power whether wheeled through the NPC grid or through existing electric utility lines; and "(6) Income Tax Holiday . For seven (7) years from the start of commercial operation, a registered minihydroelectric power developer shall be fully exempts from income taxes levied by the National Government." Such being the case, since your clients, Hydro Electric Development Corporation and Northern Mini-Hydro Corporation are both registered under R.A. 7156 (on November 20, 1992), which explicitly grants full exemption from income tax to minihydroelectric power developers for a period of seven (7) years from the start of commercial operation, they are exempt from income tax and consequently from the creditable expanded withholding tax prescribed under Revenue Regulations No. 6-85, as recently amended by Revenue Regulations No. 12-94 effective July 16, 1994 superseding Revenue Regulations Nos. 6-94, 7-94 and 8-94 and implementing Section 50(b) of the Tax Code, as amended. [Sec. 4(b) Revenue Regulations No. 6-85, as amended]. cdpr Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue