BIR Ruling [UN-425-95]

December 4, 1995 BIR RULING [UN-425-95] Manila Gas Corporation 1536 Paz M. Guazon Manila Attention: Mr . Ramon R . Yap VP - Finance Gentlemen : This refers to your letter dated May 18, 1995, in effect, requesting for the exemption from the expanded withholding tax of two companies, namely: Manila Gas Corporation (MGC) and Inter-Island Gas Service, Inc. (IIGSI), on their sale of LPG in view of Revenue Memorandum Circular No. 28-94 dated July 29, 1994. It is represented that MGC and IIGSI are government owned and controlled corporations by virtue of MGC's being owned by the National Development Company and IIGSI being a fully owned subsidiary of MGC; and that you have accumulated substantial amount of tax withheld at source which you could not apply for other tax payments considering that both companies are operating at almost breakeven level. In reply, please be informed that RMC 28-94 is an amplification/clarification of the provision of Section 1(n) of Revenue Regulations No. 6-85, as amended by Revenue Regulations No. 12-94, prescribing the withholding of a creditable income tax on income payments made by any of the top 5,000 corporations. Considering that MGC and IIGSI are government owned and controlled corporations, income payments to them shall not be subject to the creditable expanded withholding tax pursuant to Section 4(a) of RR 6-85 as amended by RR 12-94. However, they are required to withhold a tax of 1% from their income payments on their purchases of goods from local suppliers in accordance with Section 1(o) of RR 6-85 as amended by of RR 12-94. Accordingly, the provisions of RMC 28-94 will not apply to you and IIGSI particularly on your sale of LPG. (BIR Ruling No. 182-94 dated December 15, 1994) Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)