Payment of Franchise Tax and Corporate Income Tax on Income Accrued Starting December 1, 1986

December 19, 1986 BIR RULING NO. 282-86 227 000-00 282-86 Gentlemen : This refers to your letter dated November 28, 1986 requesting for and in behalf of your client, Globe-Mackay Cable and Radio Corporation (GMCRC) a ruling as to whether it can start paying 3% franchise tax and the corporate income tax on income accrued starting December 1, 1986 pursuant to Section 227 of the Tax Code, as amended by Executive Order No. 72. It appears that GMCRC, a domestic corporation and holder of a legislative franchise under Batas Pambansa No. 95 has "the right and privilege of constructing, maintaining and operating communications systems by radio, wire, cable, satellites, and any other means now known to science or which in the future may be developed for the reception and transmission of telecommunications between any point in the Philippines to points exterior thereto, including airplanes, airships or any type of vessels, even though such airplanes, airships or any type of vessel be located within the territorial limits of the Philippines, and the receiving of messages from such exterior points; that Batas Pambansa Blg. 95 imposed a consideration for the grant of the franchise in the form of the payment of 5% franchise tax which is in lieu of income tax; that the exemption from corporate income tax starting December 24, 1980 of GMCRC was confirmed by the Commissioner of Internal Revenue in BIR Ruling No. 160-86 dated September 8, 1986; but that on November 25, 1986, Executive Order No. 72 was passed amending Section 227 of the Tax Code by imposing a 3% franchise tax on telephone and/or telegraph systems and radio broadcasting stations and subjecting them to income tax under Title II of the National Internal Revenue Code. In reply, please be informed that your request is answered in the affirmative. Although the effective date of Executive Order No. 72 is November 25, 1986, this Office is mindful of the fact that the provisions thereof were not known to the taxpayers concerned until its publication in full in newspapers of general circulation. Evidence has been presented by you that said publication took place on December 1, 1986. Accordingly, and in fairness to all concerned, this Office is enforcing strictly the provisions of said Executive Order beginning December 1, 1986. (See Revenue Memorandum Circular No. 85-78). aisadc Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner of Internal Revenue