BIR Ruling [UN-362-95]

October 5, 1995 BIR RULING [UN-362-95] Universal Textile Mills, Inc. Barangka, Marikina Metro Manila Attention: Mr . Guiller E . Tumangan Senior Vice President Gentlemen : This refers to your letter dated September 15, 1995, requesting from the creditable expanded withholding tax prescribed by Revenue Regulations No. 6-85, as amended by Revenue Regulations No. 12-94 on your sale of real properties, i.e., land, buildings, its improvements and equipments. aisadc You have represented that you are a domestic corporation incorporated on January 8, 1954 and engaged in the manufacture of textiles; that you have suffered tremendous losses from your business operations during the years 1990, 1991, 1992, 1993 and 1994 in the respective amounts of P49,295,227.00, P26,643,475.00, P45,954,518.00, P197,363,851.00 and P75,753,163.00; as evidenced by your attached duly audited financial statements and income tax returns for the said years; that as of December 31, 1994, you have a deficit of P390,967,088.00; that as a result, you to have stopped manufacturing operations effective March 24, 1994 pursuant to a resolution during a meeting of the Board of Directors held on February 18, 1994; and that in order to meet your outstanding obligations to creditors and the separation/financial assistance of employees, you have decided to sell your land, buildings, its improvements and equipments which are mortgaged with several banks. In reply, please be informed that under Section 4 (d) of Revenue Regulations No. 6-85, as amended by Revenue Regulations No. 12-94, implementing Section 50 (b) of the Tax Code, as amended, the withholding tax therein prescribed shall not apply to income payments to a payee who suffered net operating losses during the immediately preceding two (2) years. Such being the case, since you have suffered net operating losses during the immediately preceding five (5) years, the income payments to be made to you on your sale of real properties, i.e., land, buildings, its improvements and equipments, is exempt from 7.5% creditable expanded withholding tax imposed by Section 1(j)(4) of said 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 from those represented, then this ruling shall be considered null and void. (BIR Ruling No. 126-94 dated August 15, 1994) Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)