Denial of Request for Exemption from Creditable Expanded Withholding Tax

June 22, 1999 BIR RULING NO. 084-99 084-99 Isuzu Automotive Dealership, Inc. Alabang, Zapote Road corner Acacia Avenue Ayala Alabang, Muntinlupa City 1780 Attention: Ms . Carla C . Lagumbay Finance & Administrative Manager Gentlemen : This refers to your letter of November 10, 1998 to the Department of Finance, which was referred to this Office on April 27, 1999, concerning your request for exemption from the 1% creditable expanded withholding tax, pursuant to the provisions of Revenue Regulations No. 12-94, on the ground that you sustained net operating losses during the prior years 1996 and 1997. Your request is premised on the provisions of Section 4(d) of Revenue Regulations No. 12-94, the pertinent portion of which reads as follows: "SEC. 4. Exemption from Withholding . The withholding of tax prescribed in these regulations shall not apply to income payments in the following cases: "xxx xxx xxx "(d) In the case of a payee who suffered net operating losses during the immediately preceding two (2) tax years; "xxx xxx xxx In reply, please be informed that the above-quoted proviso of Revenue Regulations No. 12-94 has already been repealed by Section 2.57.5 of Revenue Regulations No. 2-98, effective January 1, 1998, as follows: "SEC. 2.57.5. Exemption from Withholding . The withholding of creditable withholding tax prescribed in these Regulations shall not apply to income payments made to the following: "(A) National government and its instrumentalities, including provincial, city or municipal governments; "(B) Persons enjoying exemption from payment of income taxes pursuant to the provisions of any law, general or special, such as but not limited to the following:. . ." It will be observed that losses sustained during the immediately preceding two (2) tax years as provided under Section 4 of Revenue Regulations No. 12-94 is no longer provided under Section 2.57.5 of Revenue Regulations No. 2-98. Accordingly, we regret to inform that your request for exemption from the 1% creditable expanded withholding tax cannot be granted for lack of legal basis. Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue