BIR Ruling [UN-292-95]

August 10, 1995 BIR RULING [UN-292-95] Reyno Tiu Domingo & Santos Law Offices 12th Floor, Strata 100 Building Emerald Avenue, Ortigas Center Pasig City Attention: Atty . Ferdinand A . Domingo Gentlemen : This refers to your letter dated July 12, 1995, requesting on behalf of your clients, Manila Brickworks, Inc. (Brickworks) and Manila Newtown Development Corporation (Newtown), for the issuance of a certificate of Exemption from the Creditable Withholding Tax pursuant to Section 4 (d) of Revenue Regulations No. 6-85, as amended by Revenue Regulations No. 12-94. It appears that Brickworks and Newtown, domestic corporations duly registered with the SEC, are selling several of their real properties situated in San Jose del Monte and Norzagaray, Bulacan; that the said corporations had been operating at a loss from 1976 to 1987 when, due to their inability to pay their loans, their assets were foreclosed by DBP in 1988 and thereafter transferred to APT for disposition; that on December 12, 1994, both corporations reacquired their assets from APT after paying the accumulated interests and resumed their respective operations in June 1995; and that on the sale of some of their reacquired assets after the resumption of their respective operations, they are presently requesting for exemptions from withholding tax on income payments received by them from the buyers. In reply, please be informed that having considered the following factors: that Brickworks and Newtown had been operating at a loss from 1976 to 1987; that while their assets were foreclosed by DBP and their plant facilities idled for a long time, they did not formally dissolve, instead, they continued to incur expenses to prevent the complete deterioration of their equipment and facilities; that although no income was generated by both corporations, they are still existing corporations and as such, during the period from 1987 up to June, 1995, they are operational entities nonetheless; hence, for 1994, 1993, and backward to 1976, they are considered to have operated at a loss. Accordingly, the income payments made to them are exempt from the creditable expanded withholding tax pursuant to Section 4 (d) of Revenue Regulations No. 6-85, as amended by Revenue Regulations No. 12-94. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, the facts turned out to be different, then this ruling shall be considered null and void. (BIR Ruling No. 126-94 dated August 15, 1994). aisadc Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)