BIR Ruling No. 371-11

October 7, 2011 BIR RULING NO. 371-11 E.O. 226; Section 2.57.5 (B) (2) of RR 2-98; RMC No. 89-78; BIR Ruling No. DA-553-99; BIR Ruling No. DA-231-02; BIR Ruling No. DA-063-03; BIR Ruling No. DA-212-03; BIR Ruling No. DA-376-04 AP Renewables, Inc. 110 Legaspi Street, Legaspi Village Makati City 1229 Attention: Consuelo D. Labao AVP-Comptroller Gentlemen : This refers to your letter dated June 30, 2009, endorsed by the Large Taxpayer Audit & Investigation Division II, requesting for the issuance of a Tax Exemption Certificate entitling AP RENEWABLES, INC. to tax incentives pursuant to the provisions of the Omnibus Investments Code of 1987, as amended (Executive Order No. 226). It is represented that AP RENEWABLES, INC. with Tax Identification Number 006-893-465, is a stock corporation duly organized under the laws of the Philippines; that it is registered with the Securities and Exchange Commission (SEC) under Registration No. CS200715979 dated October 9, 2007; that it is duly registered with the Board of Investments (BOI) with Certificate of Registration No. 2009-083 and 2009-084, both dated June 19, 2009 under registration/activity "New Operator of the 458.5 MW Makban Geothermal Power Plant (Mt. Makiling, Makban, Laguna)" and "New Operator of 289 MW Tiwi Geothermal Power Plant (Tiwi, Albay)" ; and that it was granted an Income Tax Holiday (ITH) for six (6) years from June 2009 or actual start of commercial operations, whichever is earlier, but in no case earlier than the date of registration. In support of its request, AP RENEWABLES, INC. has submitted the following documents: 1) Letter application for tax exemption; 2) Certified true copy of Certificate of Registration No. 2009-083 and 2009-084, both dated June 19, 2009 issued by the Board of Investments; cTADCH 3) Certified true copy of Specific Terms and Conditions; 4) Certified true copy of the Certificate of Registration with the SEC; 5) Certified true copy of the Amended Articles of Incorporation; 6) Certified true copy of the By-Laws; 7) Certified true copy of the 2010 General Information Sheet; 8) Certified true copy of Annual Income Tax Return with Audited Financial Statements for the last 3 years of operation; 9) BIR Certificate of Registration; 10) Affidavit of Non-Forum Shopping (as per RDAO 3-2009); and 11) Authority to File, Process and Follow-up. In reply, please be informed that Sec. 2.57.5 (B) (2) of Revenue Regulations No. 2-98, as amended, provides that the withholding tax therein prescribed shall not apply to income payments made to corporations registered with the BOI and enjoying exemption from the payment of income taxes pursuant to the provisions of the Omnibus Investment Code of 1987, as amended. Considering that AP RENEWABLES, INC.'s registered activities "New Operator of the 458.5 MW Makban Geothermal Power Plant (Mt. Makiling, Makban, Laguna)" and "New Operator of 289 MW Tiwi Geothermal Power Plant (Tiwi, Albay)" are registered with the BOI and enjoying exemption from the payment of income taxes for the periods covered by its Certificate of Registration pursuant to the provisions of Article 39 (a) (1) of the Omnibus Investments Code of 1987, the income payments made by its customers in connection with its BOI-registered activities during the ITH periods, shall not be subject to creditable withholding tax prescribed by Revenue Regulations No. 2-98, as amended. (BIR Ruling No. DA-553-99 dated September 23, 1999; DA-231-02 dated December 3, 2002; DA-063-03 dated March 3, 2003; DA-212-03 dated July 8, 2003; DA-376-04 dated July 6, 2004) AP RENEWABLES, INC. is exempt from the creditable withholding tax imposed under RR 2-98, as amended, on income payments received by it during the aforementioned period with respect to its registered activities, which shall be limited only to the following: (1) sales/revenue generated from the sales of electricity of the 458.5 MW Makban Geothermal Power Plant Project, (2) sales/revenue generated from the sales of electricity of the 289 MW Tiwi Geothermal Power Plant Project, and (3) revenues generated from the sales of carbon emission reduction credits; subject however to the condition that both the BOI General and Specific Terms and Conditions for the grant of ITH are met during the said period. IDSEAH It should be understood that AP RENEWABLES, INC. shall be constituted as withholding agent of the government if it acts as an employer and its employees receive compensation income subject to the withholding tax under Section 79 (A), Chapter XIII, Title II of the Tax Code of 1997, as amended, and as implemented by Revenue Regulations (Rev. Regs.) No. 2-98, as amended, or if it makes income payments to individuals or corporations subject to the expanded withholding tax provided for in Section 57 (B) of the same Code, also as implemented by Rev. Regs. No. 2-98, as amended. Finally, a copy of this letter of exemption shall be attached to the annual information return which the Association will file on or before the 15th day of the fourth month of each year. Under Section 235 of the Tax Code of 1997, as amended, any provision of existing general and special law to the contrary notwithstanding, the books of accounts and other pertinent records of tax-exempt organizations or grantees of tax incentives shall be subject to examination by the BIR for purposes of ascertaining compliance with the conditions under which they have been granted tax exemptions or tax incentives, and their tax liabilities, if any (RMC No. 89-78 dated October 30, 1973 publishing the amendment effected by P.D. No. 1457 to then Section 324 now Section 235 in relation to Section 232 of the Tax Code, 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