BIR Ruling No. 354-11

September 28, 2011 BIR RULING NO. 354-11 E.O. 226; BIR Ruling No. DA-456-07 Jimenez Gonzales Bello Valdez Caluya & Fernandez SOL Building, 112 Amorsolo St., Legazpi Village, Makati Attention: Ann Sophie M. Nepomuceno Mariel A. Mailom Tax Partners Gentlemen : This refers to your letter, dated January 5, 2011, requesting on behalf of your client, Alliance Mansols, Inc. ("AMI"), for a certificate of tax exemption from payment of Creditable Withholding Tax by virtue of the Income Tax Holiday (ITH) granted to AMI by the Board of Investments (BOI) under Executive Order (E.O.) No. 226 otherwise known as the Omnibus Investments Code of 1987, for a period of four (4) years from start of commercial operations/selling. It is represented that AMI is a corporation organized and existing under and by virtue of Philippines laws, with SEC Registration No. CS201012228 dated 06 August 2010. It is likewise registered with the Board of Investments ("BOI") as a New Provider of Export Services for Electronic Products Manufacturing such as but not limited to Inspection, Assembly and Testing under BOI Registration No. 2010-205 pursuant to Board Resolution No. 35-4 Series of 2010. In reply, please be informed that under Section 2.57.5 (B) (2) of Revenue Regulations No. 2-98, implementing Section 57 (B) of the Tax Code of 1997, the withholding tax prescribed in the said Regulations shall not apply to income payments to persons enjoying exemption from the income tax provided by Republic Act No. 7916 and the Omnibus Investments Code of 1987. (BIR Ruling No. DA-456-07 dated August 21, 2007) Accordingly, since AMI is a BOI-registered enterprise, enjoying exemption from payment of income taxes pursuant to the provisions of Section 39 (a) (1) of the Omnibus Investments Code of 1987 for a period of 4 years from December 2010 or actual start of commercial operations, whichever is earlier but in no case earlier than the date of registration, this Office is of the opinion, as it hereby holds, that it is exempt from the payment of the creditable withholding tax imposed under Revenue Regulations No. 2-98, on income payments received by it during the aforementioned period with respect to its registered activity. However, such entitlement to ITH is not automatic as AMI has still to comply with Section 7 (a) of the BOI Specific Terms and Conditions, viz.: (1) Submit to BOI audited segregated income statements for its registered project; (2) File an application with the BOI Incentives Department within one (1) month from the filing of the final Income Tax Return (ITR) with the Bureau of Internal Revenue (BIR) in order to validate the claim for income tax exemption. The application shall be accompanied by a certification from the Social Security System (SSS) that the enterprise is in good standing in the remittance of SSS contributions of its employees; and (3) Secure a Certificate of ITH Entitlement (CoE) from the BOI Supervision and Monitoring Department prior to filing of ITR with the BIR; otherwise, ITH for that particular taxable year without CoE shall be forfeited. It should be understood that AMI shall be constituted as a withholding agent for the government if it acts as employer and any of its employees receive compensation income subject to compensation withholding tax, or if it makes payments to individuals or corporations subject to the withholding taxes as source as required under Chapter XIII and Section 57 of the Tax Code of 1997, as amended and implemented by Revenue Regulations No. 2-98, as amended. Likewise, AMI is required to file on or before the 15th day of the fourth month following the close of your accounting period a Profit and Loss Statement and Balance Sheet with the Annual information Return under oath, stating your gross income and expenses incurred during the taxable year. Finally, AMI's books of accounts and other pertinent records shall be subject to periodic examination by revenue enforcement officers of this Bureau for the purpose of ascertaining whether you have been complying with the conditions under which you have been granted tax exemption or tax incentives and your tax liability, if any, pursuant to Section 235 of the Tax Code of 1997, as amended. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue