BIR Ruling [UN-410-95]

November 20, 1995 BIR RULING [UN-410-95] Pilipinas Shell Petroleum Corporation Shell House, 156 Valero Street Salcedo Village, Makati City Metro Manila Attention: Mr . I . G . Pe Benito Head, Tax Compliance Gentlemen : This refers to your letter dated May 15, 1995 requesting a ruling as to whether or not rental payments to provincial and municipal governments, as well as government-owned and controlled corporations are subject to the expanded withholding tax. cdtech It is represented that your company, Pilipinas Shell Petroleum Corporation is engaged in the manufacture, distribution and marketing of refined petroleum products; that you pay rentals on lands leased to you by some provincial and municipal governments, as well as, government owned and controlled corporations; that you are deducting withholding taxes on said rental payments, as you believed the exemption from income tax and consequently from the expanded withholding tax required under Revenue Regulations No. 6-85 of said entities were withdrawn by Executive Order No. 93; and that there seems to be a conflict with the issuance of R.R. 12-94 amending R.R. 6-85 exempting income payments to the national government and its instrumentalities, including provincial, city or municipal governments, as well as government-owned or controlled corporations from the expanded withholding tax. In reply thereto, please be informed that pursuant to P.D. No. 1177 dated July 30, 1977 all units of government including government-owned or controlled corporations shall pay income taxes, customs duties and other taxes and fees as are imposed under revenue laws. Moreover, P.D. 1931 issued on June 11, 1984 withdrew all exemptions from the payment of duties, taxes, fees, imposts and other charges granted in favor of government-owned or controlled corporations including their subsidiaries. Finally, Executive Order No. 93 effective March 10, 1987 withdrew all tax and duty incentives granted to government and private entities. The national government and its instrumentalities including provincial, city or municipal governments are not subject to internal revenue taxes. Thus, income payments to them are not subject to the expanded withholding tax under Section 4 of Revenue Regulations No. 12-94 amending Revenue Regulations No. 6-85. However, while income payments to government-owned or controlled corporations are also not subject to the expanded withholding tax under Section 4 of Revenue Regulations No. 12-94 amending Revenue Regulations No. 6-85, nevertheless, they are subject to corporate income tax pursuant to Section 24 (c) of the Tax Code, as amended. (BIR Ruling No. 056-88 dated February 24, 1988). cd Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)