Whether Tax Exemption Privilege under Article 39(a)(1) of the Omnibus Investments Code Applies Without Distinction to All BOI-Registered Enterprises to the Extent that such Enterprises are Engaged in a Preferred Area of Activity Listed in the IPP

February 11, 1994 BIR RULING NO. 061-94 50 (b) E.O. 226 085-93 061-94 Romulo, Mabanta, Buenaventura Sayoc & De Los Angeles Fourth Floor, King's Court 2129 Pasong Tamo, Makati Metro Manila Attention: Atty . Carlos G . Baniqued Gentlemen : This refers to your letter dated January 25, 1993 requesting, in behalf of your client, GATEWAY PROPERTY HOLDINGS, INC. (hereinafter referred to as "GPHI"), for reconsideration of BIR Ruling No. 049-93 dated January 22, 1993 holding that notwithstanding its 4-year income tax holiday under Article 39(a)(1) of the Omnibus Investments Code, your said client, a BOI-registered enterprise, is subject to the creditable expanded withholding tax on the sale of real property under Revenue Regulations No. 1-90. Specifically, you are controverting our position that the grant of preferential tax treatment under Article 39(a)(1) of the Omnibus Investments Code would only apply to pioneer and non-pioneer registered enterprises that are producers, manufacturers, or processors; thus, since industrial estate developers, like GPHI, are neither producers, manufacturers, or processors of specific products or commodities, they are not eligible for registration under Book I of the Omnibus Investments Code and neither are they includible in the listing of qualified economic activities under the 1992 Investment Priorities Plan (IPP). You contend that the tax exemption privilege under Article 39(a)(1) of the Omnibus Investments Code applies without distinction to all BOI-registered enterprises to the extent that such enterprises are engaged in a preferred area of activity listed in the IPP; and that since the 1992 Investment Priorities Plan which was approved by the Office of the President under Memorandum Order No. 427, includes industrial estates (Group VIII, A., page 10 IPP), BIR Ruling No. 049-93 is erroneous insofar as it holds your client liable to income and withholding taxes during the 4-year period from its registration with the Board of Investments (BOI). In declining to render a ruling on BIR's inquiries concerning the determination of the correctness of the ruling of the BOI, the Secretary of Justice in his Opinion No. 122, S. 1992 dated September 21, 1992 stated that the interpretation of the provisions of Executive Order No. 226, otherwise known as Omnibus Investments Code of 1987, is a purely BOI matter, and that the Secretary of Justice possesses neither supervisory, nor revisory authority thereon. Such being the case, the authority to decide what economic activity to include in the IPP likewise rests with the BOI, subject to approval of the President. Accordingly, since the BOI has in fact included the activity of industrial estates development in the 1992 Investment Priorities Plan which was approved by the Office of the President in Memorandum Order No. 427 effective May 11, 1992, and in the spirit of harmonizing inter-agency policies, this Office is of the opinion, as it hereby holds, that the sale of industrial lots by your client, GATEWAY PROPERTY HOLDINGS, INC., enjoys a 4-year income tax holiday from the date of its registration with the Board of Investments pursuant to Article 39(a) (1) of the Omnibus Investments Code. Consequently, for the same period, it is also exempt from the creditable withholding tax on their sales of industrial lots as an exception to Revenue Regulations No. 1-90. This revokes BIR Ruling No. 49-93 dated January 22, 1993. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue