Restoration of the Tax-Exemption of NPC

December 12, 1989 BIR RULING NO. 254-89 117 000-00 254-89 Gentlemen : This refers to your letter dated May 16, 1989 requesting a ruling as to whether or not the PNOC Dockyard and Engineering Corporation (PDEC), a subsidiary of PNOC, is required to deduct and withhold the 2% franchise tax from its money payments to National Power Corporation (NPC). cdta It is represented that PNOC Dockyard and Engineering Corporation, (PDEC), a government-owned and controlled corporation buys its electric power requirements from the National Power Corporation (NPC), also a government-owned and controlled corporation; that PDEC deducts and withholds the 2% franchise tax from its electric bills payments to NPC; and that the National Power Corporation is presently questioning the withholding of franchise tax on the ground of its tax-exemption. In reply, please be informed that pursuant to FIRB Resolution No. 17-87 dated June 24, 1987 the tax-exemption of NPC was restored as of March 10, 1987 except that which pertains to its importation of fuel oil (crude equivalent) and coal; commercially funded importations; and interest income derived from any source. Such being the case, money payments to NPC are not subject to franchise tax, prescribed under Section 117 of the Tax Code; hence, exempt from the withholding provisions of Revenue Regulations No. 4-83 implementing R.A. 1051. cdta Very truly yours, (SGD.) JOSE U. ONG Commissioner