Exemption from the Expanded Withholding Tax Law

September 3, 1979 BIR RULING NO. 079-79 Exemption from the Expanded Withholding Tax Law This refers to your letter dated February 2, 1979 requesting a certification to the effect that the Philippine National Oil Company (PNOC) is not subject to the provisions of Revenue Regulations No. 13-78, as amended by Revenue Regulations No. 6-79, implementing Presidential Decree No. 1351, on the ground that pursuant to its charter, Presidential Decree No. 334, as amended by Presidential Decree No. 572, it is exempt from all taxes whether imposed directly or indirectly. In reply, I have the honor to inform you that Section 23 of Presidential Decree No. 1177 which took effect on July 30, 1977 subjects all units of government, including government-owned or controlled corporations to the payment of income taxes, customs duties and other taxes and fees imposed by revenue laws. Since the PNOC is a government-owned or controlled corporation, it is subject to the payment of income tax and other taxes imposed by internal revenue laws. Section 23 of Presidential Decree No. 1177 has the effect of withdrawing from government owned or controlled corporations the tax exemptions granted in their respective charters. This provision is a clear and unequivocal expression of the legislative intent to subject all units of government including government-owned or controlled corporations to the payment of all taxes, customs duties and other taxes and fees imposed under revenue laws. Therefore, the charter of any government corporation which provides for the exemption of the particular corporation from any tax, duty or fee should to the extent of the imposition of the exemption be deemed repealed by P.D. No. 1177. This is in consonance with the rule that prior special law (the tax exemption provision in the charter) may be repealed by implication upon the enactment of a later general statute (P.D. 1177) where the legislative intent to effectuate a repeal is unequivocably expressed. (Sutherland, Statutes and Statutory Construction, Volume 1, page 487, cited in Secretary of Justice; Opinion No. 133 s. 1977 dated November 23, 1977). However, it appears that the purposes for which that company is created are to provide and maintain an adequate and stable supply of oil and petroleum products for domestic requirements; to promote the exploration, exploitation and development of local oil and petroleum sources; and to foster oil or petroleum operation conditions conducive to a balanced and sustainable growth of the company. Such being the case, since income payment made to your company is not one of those specified in the Regulations, you are not subject to the expanded withholding tax. Moreover, under the said Regulations, payments only to persons enumerated therein are subject to withholding tax. Since payments to your subsidiaries which are common carriers, are not among those specified in the Regulations, they are not subject to the withholding tax.