Publishing Letter of Instructions No. 1416, dated 17 July 1984 and Ministry of Trade Order No. 19, Series of 1984, dated 24 July 1984

October 2, 1984 REVENUE MEMORANDUM CIRCULAR NO. 23-84 SUBJECT : Publishing Letter of Instructions No. 1416, dated 17 July 1984 and Ministry of Trade Order No. 19, Series of 1984, dated 24 July 1984 TO : All Internal Revenue Officials, Employees and Others Concerned For the information and guidance of all concerned, quoted hereunder are the pertinent provisions of Letter of Instructions No. 1416: "In view of the foregoing, it is therefore, in the national interest that the Government assist the copper industry and towards this end, I hereby order and direct the suspension of payment of all taxes, duties, fees, imposts and other charges, whether direct or indirect, due and payable by the copper mining companies in distress to the National and Local Governments under the following conditions: "1. Only copper mining companies as determined by the Minister of Trade and Industry who can demonstrate that their continued operations under the present operating conditions and market situation can not be viably sustained may avail of the suspension of payment privilege. cd "2. The suspension of payment privilege shall be lifted once the world market price of copper reaches a level adequate to sustain the operation of copper mines as determined by the Minister of Trade and Industry and subject to the approval of the President. "3. The repayment of taxes, duties, fees and imposts and collection of which have been suspended shall be scheduled according to the individual paying capacity of each mining company, the repayment of which shall commence after the world market price has stabilized at an economically viable level as determined by the Minister of Trade and Industry and subject to the approval of the President. "4. The Minister of Trade and Industry shall have the authority to certify copper mining companies as eligible for suspension of payments, subject to the approval of the President. "5. The Minister of Energy is authorized to permit the sale and delivery of petroleum products to copper-mining companies with tax suspension privilege, without payment of taxes, duties and imposts on the relevant products provided such unpaid amount forms part of the unpaid taxes of the particular mining company. "6. The Minister of Trade and Industry is authorized to promulgate the implementing rules for this Letter of Instructions." and Ministry of Trade Order No. 19, series of 1984: "Sec. 1. Scope of Privilege Payment of all taxes, duties, dues, imposts and other charges, whether direct or indirect due and payable by distressed copper mining companies to the national and local governments shall be suspended under such terms and conditions as the Minister of Trade and Industry may determine under these implementing rules and regulations. The privilege, shall not, however, apply to non-mining related activities. "Sec. 2. Application for Privilege 2.1. A distressed copper mining company seeking to avail of the privilege for the suspension of taxes shall file their intention to avail with the Office of the Minister, Ministry of Trade and Industry, Industry and Investments Building, 385 Sen. Gil J. Puyat Avenue, Makati, Metro Manila. 2.2. The applicant shall provide sufficient documentation to demonstrate that its continued operations under present market and operating conditions cannot be viably sustained. These documents include, but are not limited to the following: a. Audited Financial Statements for the immediate Preceding Calendar Year (1983); b. Financial Statements for the 1st half of 1984; c. Projected Financial Statements for the 2nd half of '84 and Calendar Year 1985, on a quarterly basis, stating major assumptions used. Two (2) sets will be required at copper price levels at 60 and 70; d. Income Tax Return for 1983; Estimated Schedule of suspended Taxes and Duties, broken down by type and quarter. The initial quarter to be 3rd quarter of '84 up to 4th quarter '85; f. Calculation of Cash Break-Even Copper Prices, as duly certified by the Chief Financial Officer of the company, of three (3) levels - Cash Break-Even Before Debt Amortization Cash Break-Even After Debt Amortization Cash Break-Even Before Debt Amortization (Excluding provision for suspended taxes). "Sec. 3. Evaluation of Application The Ministry of Trade and Industry shall undertake a thorough and careful evaluation of the above documents. Should the documents be unclear of certain representations, the applicant may be called to explain, elaborate or justify these representations. "Sec. 4. Certificate of Eligibility Should the applicant be able to demonstrate that its operations can not be viably sustained under present market and operating conditions, the Ministry of Trade and Industry shall recommend the issuance of a Certificate of Eligibility to Suspend Payments (CESP) and terms and conditions of such availment for the approval of the President. "Sec. 5. Effectivity of Privilege The privilege shall commence on the date the Certificate of Eligibility to Suspend Payments is approved until such time that free market prices of copper has reached a level adequate to sustain the operation of the distressed copper mining companies as certified by the Ministry of Trade and Industry, subject to the approval of the President. "Sec. 6. Cancellation of Privilege Any above provision to the contrary notwithstanding, the CESP may be cancelled at any time for any of the following grounds: a. Application is found to have certain false misleading statements; b. Documents submitted in support of the application are found to be spurious; c. Failure to comply with the terms and conditions of the availment of the privilege. "Sec. 7. Requirements for Those Granted the Privilege 7.1. The Company which avails of the privilege to suspend tax payments shall submit: a. Monthly financial statements within 15 days from the end of every month; cd i b. Breakdown of actual taxes, duties and others, due and payments for the month immediately preceding, payment of which were suspended under LOI No. 416 within 15 days from the end of each month. 7.2. For the entire effectivity of the privilege and until full repayment of the "taxes and duties deferred under LOI No. 1416" the Minister of Trade and Industry or his authorized representatives, shall have the right to audit the books of the company which avails of the privilege to suspend tax payments. 7.3. The company shall declare any cash dividends on common shares for the entire effectivity of the privilege. "Sec. 8. Petroleum Products All distressed copper mining companies which have been granted the privilege of suspending tax payments are entitled to apply to the Minister of Energy for exemption from payment of all taxes, duties, imposts and other charges on petroleum products, who shall authorize to issue a permit exempting payment of all such taxes, duties, etc. under terms and conditions the Minister of Energy may impose. "Sec. 9. Schedule of Repayment 9.1. Upon immediate lifting of the state of suspension of tax payments as provided for in Sections 5 & 6 the company shall submit a proposed schedule of repayment within 15 days from above-lifting for consideration of the Ministry of Trade and Industry and other agencies involved. The company shall justify the schedule of repayment in relation to its projected cash flows and/or profits and losses. 9.2. The period allowed for repayment shall not exceed the equivalent period of suspension unless otherwise approved by the President upon recommendation of the Minister of Trade and Industry. cd 9.3. Repayments of taxes, duties, etc. suspended under LOI No. 1416 shall be applied pro rata to all the types of taxes, duties, etc. without preference or priority to any class of taxes, duties, etc. "Sec. 10. Penalties Any violation of LOI 1416, its implementing rules and regulations shall cause the immediate acceleration of all taxes, duties suspended under LOI No. 1416 as if these were due and payable." All internal revenue officers and others concerned are enjoined to be guided accordingly and to give this circular as wide a publicity as possible. RUBEN B. ANCHETA Acting Commissioner