BIR Ruling No. 254-82

October 8, 1982 BIR RULING NO. 254-82 267-02 000-00 254-82 Metropolitan Waterworks and Sewerage System Katipunan Road, Balara, Quezon City Attention: Mr . Oscar I . Ilustre General Manager Gentlemen : This refers to your letter dated July 19, 1982 requesting exemption from the withholding and deducting of the 2% franchise tax on the remittances to you of our payment for monthly bills in view of Section 18 (b) of R.A. No. 6234, as amended by P.D. No. 425, which states that you are exempt "from all income taxes, franchise taxes and realty taxes to be paid to the National Government, its provinces, cities, municipalities and other Government agencies and instrumentalities. In reply, I have the honor to inform you that Presidential Decree No. 1177, effective July 30, 1977, requires all units of government including government-owned or controlled corporation to pay income taxes, customs duties and other taxes and fees as are imposed under revenue laws. (See Opinion No. 133 s. 1977, Secretary of Justice). Accordingly, that System is subject to income and franchise taxes under Section 24 and 267 (a) of the Tax Code, as amended. However, as a government owned or controlled corporation you are entitled to either a tax subsidy or payments constituting equity contributions in which case you shall not be required to pay cash or its equivalent. The revenue collecting agencies shall instead issue a "Payment Compliance Certificate" indicating the nature of the assessment and amount due. The subsidy or equity contributions shall be effected through journal vouchers or their equivalent. (See Joint Budget Circular No. 289 and par. 4, 6 and 9, Finance Circular No. 2-78, implementing Section 24, P.D. 1177.). This serves as authority for the Bureau of Internal Revenue Officers concerned to forego withholding of the franchise tax on all payments of our monthly water bills. Very truly yours, RUBEN B. ANCHETA Acting Commissioner