Exemption from Compensating Tax

October 23, 1979 BIR RULING NO. 096-79 Exemption from compensating tax This refers to your letter dated September 13, 1979 informing this Office that the Philippine Plaza Hotel, a division of the Cultural Center, which has been paying the following taxes: 1. Privilege fixed tax 2. Percentage taxes 3. Taxes on importations 4. Income taxes of expatriates 5. Withholding tax under P.D. 1351 would like to avail of the tax exemption granted the Cultural Center under P.D. No. 1444. Section 6 of P.D. No. 1444, amending Section 13 of P.D. No. 15 and P.D. No. 079, provides as follows: "Sec. 13. Tax-Exemption . The provisions of Section 1205 of the Tariff and Customs Code, as amended by Presidential Decree No. 34 dated October 28, 1972, Section 190 of the Tax Code, as amended by Presidential Decree No. 69 dated November 24, 1972, and other existing laws notwithstanding, the Center shall be exempt from all forms of taxation whatever including withholding taxes on fees paid to foreign artists passed on to the Center by contract, and from duties and all other imposts on any equipment, articles, goods, or services that it may import from abroad, which may be reasonably necessary for use in or part of its operations. This exemption shall not include income tax exemption for operating profit-making business ventures such as the hotel ." (Emphasis ours) casia In reply, please be informed that another amendment effected by P.D. No. 1444 to Section 4 of P.D. No. 15, is that "the Center may construct, establish, operate and maintain a trade center, hotel and such other buildings and facilities; Provided , That whatever income that may be derived therefrom shall be invested in the Cultural Development Fund, or utilized for such purposes as its government board may decide upon, consistent with the purposes and objectives of the Center as provided in Section 2 of this Decree." Under this new provision, it would seem that the above-quoted provisions of Section 13 governing the tax exemption privilege of the Center now applies to the Philippine Plaza Hotel being operated and maintained by it. Accordingly, the Center, in its operation of the Philippine Plaza Hotel, is exempt from the fixed and percentage taxes prescribed in Sections 192(1) and 205-A of the Tax Code of 1977, as amended. Moreover, its importations of any equipment, articles, or goods which are reasonably necessary for use in or part of its operations are exempt from the compensating tax. Likewise, the Center is exempt from withholding tax on fees paid to foreign artists if such tax is passed on to and/or assumed by the Center by contract; otherwise, the Center shall withhold the incomplex on such fees. However, the Center is subject to income tax on its income derived from the operation of the Philippine Plaza Hotel . It shall withhold and remit to this Bureau the corresponding tax on its income payments which are subject to the withholding tax under P.D. No. 1351 as implemented by Revenue Regulations No. 13-78, as amended by Revenue Regulations No. 6-79.