BIR Ruling No. 138-96

December 12, 1996 BIR RULING NO. 138-96 110 (c) 000-00 138-96 Ms. Myrna E. Sobremonte Chief, Accounting Division B.I.R., Quezon City M a d a m : This refers to your letter dated July 22, 1996 requesting for a ruling as to whether or not the money payments made by this Bureau to the Bangko Sentral ng Pilipinas (BSP) are subject to the withholding of 6% creditable value-added tax and to the 1% creditable expanded withholding tax. casia In reply, please be informed that under Section 110 ( c ) of the Tax Code, as amended by R.A. No. 7649 as further amended by R.A. No. 7716, the government or any of its political subdivisions, instrumentalities or agencies, including government-owned or controlled corporations (GOCCs) shall, before making money payments deduct and withhold the value-added tax at the rate of 6% on gross receipts for services rendered by contractors which are subject to the value-added tax under Section 102 thereof. Pursuant to Section 125, Article 1 of R.A. No. 7653 otherwise known as the New Central Bank Act, the BSP is exempt from all national, provincial, municipal and city taxes, fees, charges and assessments which tax exemption privileges obviously include the 10% value-added tax imposed under Sections 100, 101 and 102 of the Tax Code, as amended by R.A. 7716. Such being the case, our money payments to the BSP for the printing and delivery of strip stamps for chewing tobacco are not subject to the withholding of 6% creditable value-added tax. Moreover, as a government-owned or controlled corporation, income payments made to the BSP are likewise not subject to 1% creditable expanded withholding tax (EWT) pursuant to Section 4 of Revenue Regulations No. 6-85, as amended by Revenue Regulations No. 12-94 which provides, viz: "Section 4. Exemption from Withholding. The withholding of tax prescribed in these regulations shall not apply to income payments in the following cases: "(a) Income payments to the national government and its instrumentalities, including provincial, city or municipal governments, as well as government-owned or controlled corporations. xxx xxx xxx" Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue