John Holland Construction Subject to 35% CWT

March 8, 1993 BIR RULING NO. 087-93 JOHN HOLLAND CONSTRUCTION SUBJECT TO 35% CWT 25 (b) (1) 98-90 087-93 Philippine National Railways Project Implementation Office Main Line South Revitalization Project Suite 604, Richbelt Tower 17 Annapolis Street, Greenhills San Juan, Metro Manila Attention: Mr . Mario S . Castilla Project Manager This refers to your letter dated September 28, 1992 stating that you have launched your Main Line South Revitalization Project the primary objective of which is to provide safe, rapid, economical and comfortable means of transportation to the riding public in the Southern Luzon. The aforementioned project was contracted with John Holland Construction Pty., Ltd., Australia, involving supply of labor, materials and equipment required for the completion of the project. The fund requirements for this project are sourced as follows: a) Foreign currency portion 77% (OECF of Japan) b) Local currency portion 23% (Govt. of the Phil.) Based on the foregoing, you now request for a clarification as to whether the foreign currency portion of the contract amount is eligible for 1% withholding tax, deductible from their monthly billings in the peso (local currency) portion. In reply, please be informed that gleaned from the covering loan agreement between the Philippines and Japan, no tax exemption is indicated. Nonetheless, if any tax exemption were provided therein, the same shall be considered without force and effect without the ratification by Congress pursuant to Section 28(4), Article IV, of the 1987 Constitution of the Philippines, which became effective on February 2, 1987, to the effect that no law granting any tax exemption shall be passed without the concurrence of a majority of all the Members of Congress. Pursuant to Section 20(h) in relation to Section 25(a)(1) of the Tax Code, since John Holland Construction Pty., Ltd., of Australia is a foreign corporation engaged in trade or business in the Philippines, it shall be subject to income tax equivalent to 35% of its taxable income derived from all sources within the Philippines. Consequently, it is also subject to the 35% creditable withholding tax, deductible from their monthly billings in the peso (local currency) portion pursuant to Section 50(b) of the same Code. cd JOSE U. ONG Commissioner of Internal Revenue