Request for Exception of Phosphate Fertilizer Corporation from Compliance with RR No. 4-89

September 20, 1994 BIR RULING NO. 143-94 50 (b) 000-00 143-94 Ponce Enrile Cayetano Reyes & Manalastas Law Offices 3rd Flr. Vennida IV Bldg. Alfaro St., Salcedo Village Makati, Metro Manila Attention: Attys . Regulus E . Cabote and Pericles C . Consunji Gentlemen : This refers to the letters dated December 1, 1993 and April 28, 1994 of the Philippine Phosphate Fertilizer Corporation (Philphos) and to your letter dated June 28, 1994 requesting exception of Philphos from compliance with Revenue Regulations No. 4-89 which requires for the withholding of taxes on money payments by Government offices, agencies and instrumentalities including government-owned or controlled corporations on the ground that it is not a government-owned or controlled corporation. It is represented that Philphos is a domestic corporation organized and operating under Philippine Laws; that it is registered with the Export Processing Zone Authority (EPZA) under Certificate of Registration No. 82-13 as a manufacturer and distributor of fertilizer products with at least 70% of its total production going to the export market; that Philphos is a joint venture between the National Development Corporation (NDC) and the Republic of Nauru whereby each owns fifty percent (50%) of the outstanding capital stock of Philphos in accordance with the second supplement to the Joint Venture Agreement between the two parties dated February 18, 1985. In reply thereto, please be informed that Section 2(13) of Executive Order No. 292 otherwise known as the Administrative Code of 1987, defines "Government owned or controlled Corporation" as any agency organized as a stock or non-stock corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly or where applicable as in the case of stock corporations, to the extent of at least fifty-one (51%) per cent of its capital stock. In view thereof, since the Government of the Philippines through the NDC owns only fifty percent (50%) of the outstanding capital stock of Philphos, it is not a government-owned or controlled corporation as defined in Section 2(13) of Executive Order No. 292. Moreover, the Secretary of Justice in Opinion No. 92 Series of 1994 opined that Philphos is not a government-owned corporation simply because NDC does not own a majority of its shares of stock. Accordingly, it is exempt from complying with Revenue Regulations No. 4-88 requiring the withholding of taxes on money payments by Government offices, agencies and instrumentalities including government-owned and controlled corporations. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue