BIR Ruling [UN-358-95]

October 3, 1995 BIR RULING [UN-358-95] Holiday Inn Resort Clark Field Mondragon House 324 Gil Puyat Avenue Makati City, Metro Manila Attention: Mr . Maurillo P . Warren Financial Controller Gentlemen : This refers to your letters dated August 7 and 18, 1995, requesting for a Certificate of Tax Exemption pursuant to the provisions of Section of 15 of R.A. No. 7227, otherwise known as the Bases Conversion and Development Act of 1992. It is represented that Holiday Inn Resort Clark Field (HIRCF) is owned by Mondragon Leisure and Resorts Corporation (MLRC) and operated by Holiday Inn (Phil.) Limited; and that HIRCF is registered with Clark Development Corporation (CDC) and conducting business within Clark Special Economic Zone (CSEZ). In reply, please be informed that Section 5 of Executive Order No. 80 authorizing the establishment of the CDC as the implementing arm of the Bases Conversion and Development Authority (BCDA) for CSEZ provides that the CSEZ shall have all the applicable incentives in the Subic Special Economic and Free Port Zone under R.A. No. 7227 and those applicable incentives granted in the Export Processing Zone, the Omnibus Investments Code of 1987, the Foreign Investment Act of 1991 and new investments law which may hereafter be enacted. On the other hand, Section 12(c) of R.A. No. 7227 provides that registered enterprises within the Secured Area of the Zone as defined in Executive Order No. 97 dated June 19, 1993 shall, in lieu of local and national taxes be liable to the payment of the following, based on gross income earned: (1) To the National Government 3% (2) To the Local Government Units affected by the declaration of the Zone 1% (3) To the Special Development Fund to be Utilized for the development of municipalities outside the City of Olongapo and the Municipality of Subic and other municipalities contiguous to the base areas 1% Such being the case, as a registered business enterprise conducting business within the Clark Special Economic Zone, HIRCF shall be liable to the above-stated preferential tax rate based on its gross income earned, in lieu of local and national internal revenue taxes. It shall also be exempt from VAT on its importation of goods/articles in connection with its business activities as such. Moreover, the sale of goods by a domestic vendor in the customs territory to HIRCF shall be considered export sales and effectively zero rated on the part of the seller. The domestic vendor shall not impute or shift any VAT as part of the cost to be paid by HIRCF on its purchases from the Customs Territory. It shall be understood however, that VAT registered domestic vendors in the Customs Territory shall apply for effective zero rating of their sales to HIRCF pursuant to Revenue Regulations No. 5-87.(BIR Ruling No. 046-95 dated March 3, 1995) aisadc Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service) By: ALICIA L. TOMACRUZ Head Rev. Executive Assistant (Legal Service)