BIR Ruling No. 298-14

July 24, 2014 BIR RULING NO. 298-14 Section 2 (r), Revenue Bulletin No. 01-03 Oakwave (Philippines) Corporation Lot 14, Block 15, Phase III Philippine Economic Zone Rosario, Cavite Attention: John O. Desbarro President Gentlemen : This refers to your letters dated 26 June 2013 and 29 October 2013 relative to your request for an opinion whether advance payment made by your major customer is subject to Documentary Stamp Tax (DST). It is represented that OAKWAVE (PHILIPPINES) CORPORATION is a PEZA-registered enterprise; that ninety percent (90%) of OAKWAVE (PHILIPPINES) CORPORATION's total sale is from Oakwave Japan Corporation ("OJC"), a non-resident foreign corporation located in Japan; that OAKWAVE (PHILIPPINES) CORPORATION holds 99.98% of OJC's common stock; that as a major customer, OJC pays OAKWAVE (PHILIPPINES) CORPORATION in advance for the service income (sales) to be generated for the month or two; that OAKWAVE (PHILIPPINES) CORPORATION will then offset the payment made by OJC by issuing sales invoices and monthly Statement of Account; that in its books, OAKWAVE (PHILIPPINES) CORPORATION records the transaction as follows: a) To record advance payment made by OJC Cash in Bank xxx Unearned Service Income xxx b) To record sales for the month Account Receivable OJC xxx Service Income xxx c) To record off-setting of accounts Unearned service income xxx Account Receivable OJC xxx that based on the foregoing, Revenue District Office (RDO) No. 54B, Rosario, Cavite of Revenue Region No. 9, San Pablo City, assessed OAKWAVE (PHILIPPINES) CORPORATION of unpaid deficiency Documentary Stamp Tax (DST) in the amount of Php482,189.47 including surcharge and interest pursuant to Revenue Memorandum Circular No. 48-2011 and Revenue Regulations No. 13-2004; and that you now seek for an opinion that the advance payment made by OJC for taxable year 2011 is not qualified as loan or advances from affiliates that is subject to DST. TCAScE In reply, please be informed that Section 2 (r) of Revenue Bulletin No. 1-2003 dated July 14, 2003 on ''No Ruling Areas", provides as follows: "Section 2. List of No-ruling Areas. The following shall be construed and identified as 'No-ruling Areas': xxx xxx xxx (r) Issue/s or transactions involving directly or indirectly the same taxpayer/s which is/are the subject of an investigation, on-going audit , administrative protest, claims for refund or issuance of tax credit certificate . . . ." In view of thereof, since your request evidently falls within the cases covered by Section 2, particularly paragraph (r) of Revenue Bulletin 1-2003, inasmuch as an assessment for deficiency taxes has already been made by the RDO on the transaction under consideration, hence, this Office cannot rule or render an opinion. Please be guided accordingly. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner Bureau of Internal Revenue