Narvacan Revenue Code 2021

February 5, 2007 BIR RULING [DA-063-07] R.A. 7916; R.R. 8-2005; 076-89 Nidec Copal Philippines Corporation Main Avenue corner Binary Street Light Industry & Science Park of the Philippines-I Special Economic Zone Bo. Diezmo, Cabuyao, Laguna Attention: Mr. Wilfredo B. Onal Finance Division Manager Gentlemen : This refers to your letter dated January 30, 2006 requesting, in effect, for a certification subjecting your refund from Meralco to a creditable withholding tax of 5% tax instead of 25% as stated in Revenue Regulations No. 8-2005 dated May 8, 2005. DAHSaT It is represented that Nidec Copal Philippines Corporation (NCPC) is registered with the Philippine Export Zone Authority as an Ecozone Export Enterprise under Registration Certificate No. 91-019 dated October 8, 1998. Among the incentives that is being enjoyed now by NCPC is "exemption from national and local taxes, in lieu thereof, payment of 5% final tax on gross income as provided in Section 24 of R.A. 7916 and Rule XX of the Rules and Regulations to implement R.A. 7916" per PEZA Certification. NCDC has qualified for the refund of the electric service payments under Meralco Phase IVB as approved by the Energy Regulatory Commission (ERC) in ERC Case No. 2001-243. However, Revenue Regulations (RR) No. 8-2005 dated February 3, 2005 (amending further pertinent provisions of RR No. 2-98), included the income payments subject to creditable withholding tax under Sec. 2.57.2(U) on Manila Electric Company (Meralco) Refund arising from the Supreme Court Case G.R. No. 14814 to customers under Phase IV as approved by ERC, prescribing a withholding tax rate of 25% for Meralco customers with active contracts and 32% for those with terminated contracts. Considering the incentives being enjoyed by NCPC, i.e., the payment of 5% final tax on gross income in lieu of national and local taxes, you now request that your refund from Meralco be exempted from the coverage of RR No. 8-2005. Instead, the same should be subjected only to the 5% creditable withholding tax. In reply, please be informed that Section 2.57.5 (B) (2) of RR 2-98, as amended by RR Nos. 3-2004 and 8-2005, is explicit in its provisions that the expanded withholding tax does not apply to income payments to persons enjoying exemption from payment of income taxes pursuant to the provisions of any law, general or special. PEZA-registered enterprises are granted certain preferential tax treatment under Section 24 of R.A. 7916 which provides that any provision of existing laws, rules and regulations to the contrary notwithstanding, no taxes, local and national shall be imposed on business establishments operating within the ECOZONE. In lieu of paying taxes, five percent (5%) of the gross income earned by all businesses and enterprises within the ECOZONE shall be remitted to the government. The exemption of PEZA-registered enterprises is further amplified in RR No. 14-2002 by providing that income payments of PEZA-registered enterprises under the 5% gross income tax incentive are exempt from being subjected to the expanded withholding tax. Based on the foregoing, the Meralco refund of the electric service payments under Meralco Phase IVB as approved by the Energy Regulatory Commission (ERC) in ERC Case No. 2001-43 is exempt from the 25% or 32% withholding tax imposed under RR No. 8-2005 and is not subject to 32% regular income tax. However, said refund will form part of NCPC's gross income subject to the 5% preferential tax. SEAHcT This will, therefore, serve as your authority to request Meralco the release of your refund without being subjected to withholding tax. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service