BIR Ruling No. 529-2018

REPUBLIC OF THE PHILIPPINES

DEPARTMENT OF FINANCE

BUREAU OF INTERNAL REVENUE EILE COPY

Quezon City

1A53

RA 8756;Secs.28A(6aand 1091J) of the Tax Code.as amended BIR Ruling No. 449-2013 2v2q8 579-24

MAKITA CO.,INC.REPRESENTATIVE OFFICE 4335 Dayap corner Filmore Street Palanan,Makati City 1235 BUREAU OF INTERN M 16 MAR 2013

Attention: Ms.ROSCEL A.MAKITA Resident Agent LAW DIMISION V0

Gentlemen:

This refers to your letter dated April 21, 2017 requesting for Certificate of Value-Added Tax (VAT) exemption.

It is represented that MAKITA CO.,INC.PHIL REPRESENTATIVE

OFFICE MAKITAfor brevity is a foreign company organized and existing under the laws of Japan and duly licensed bv the Securities and Exchange Commission under SEC Registration No. which function is to act as a Messenger/Communication Center between Japan and Philippine Office.As a

Messenger Center,MAKITA is to serve as a buying office for all the requirements of Japan Head Office and buys Philippine Products and ships all the goods purchased to

Japan for resale.

In reply, please be informed that Republic Act (RA) No.8756 provides the following as regards the licensing of Regional or Area Headquarters:

"Chapter I

LICENSING OF REGIONAL OR AREA HEADQUARTERS

those of the Philippines whose purpose, as expressed in its organizational documents or by resolution of its Board of Directors or its Art. 58. business entity formed, organized and existing under any laws other than Qualification of Regional or Area Headquarters.- Any foreign

equivalent, is to supervise, superintend, inspect or coordinate its own affiliates, subsidiaries or branches in the Asia-Pacific Region and other foreign markets may establish a regional or area headguarters in the Philippines, by securing a license therefor from the Securities and Exchange Commission, upon the favorable recommendation of the Board

of Imvestments.

AN ACT PROVIDING FOR THE TERMS. CONDITIONS AND LICENSING REQUIREMENTS OF REGIONAL OR AREA HEADQUARTERS, REGIONAL OPERATING HEADQUARTERS AND REGIONAL WAREHOUSES OF MULTINATIONAL COMPANIES, AMENDING FOR THE PURPOSE CERTAIN PROVISIONS OF EXECUTIVE ORDER NO.226.OTHERWISE KNOWN AS THE OMNIBUS INVESTMENTS CODE OF 1987.

MAKITA CO., INC. PR/REPRESENTATIVE OFFICE Page 2 of 3

regulations. The following minimum requirements shall, however, " be from the effectivity of this Code, issue the implementing rules and complied with by the said foreign entity: " (emphasis supplied) The Securities and Exchange Commission shall, within thirty (30) days

1997, as amended, provide tax exemptions to regional or area headquarters, to wit: In relation to this, Sec. 28 (A) (6) and Sec. 109 (1) (J) of the Tax Code of

"Sec. 28. Rates of Income Tax on Foreign Corporations.

A. Tax on Resident Foreign Corporations.

XXX X XXX

(6) Regional or Area Headquarters and Regional Operating Headquarters of Multinational Companies.-

(a) Regional or area headquarters as defined in Section 22 (DD)2 shall

not be subject to income tax.

XX xXX XXX

"Sec. 109. Exempt Transactions

(1) Subject to the provisions of Subsection (2) hereof, the following transactions shall be exempt from the value-added tax.

XXX xxx s xxx

Philippines by multinational corporations which act as supervisory, communications and coordinating centers for their affiliates, subsidiaries (J) Services rendered by regional or area headguarters established in the

or branches in the Asia-Pacific Region and do not earn or derive income from the Philippines. "

Clearly, the above-quoted provisions are tax exemptions given to regional or area headquarters and do not grant the same to a representative office as in the case of MAKITA. It is apparent that the tax code provisions, granting exemption from income tax and VAT, is limited to regional or area headquarters. (BIR Ruling No. 449-2013 dated November 27, 2013)

Strictly construed against the taxpayer. Exemptions are never presumed and the burden is upon the taxpayer to establish his right to exemption beyond reasonable It should be remembered that laws and statutes granting tax exemptions are

doubt3. In the case of Mactan Cebu International Airport Authority v. Marcos4 , the Supreme Court held:

2 a branch established in the Philippines by multinational companies and which headquarters do not earn or derive income from the Philippines and which act as supervisory, communications and coordinating center for

3 Dimaampao, Japar B. Tax Principles and Remedies. Second Edition (2005 their affiliates, subsidiaries. or branches in the Asia-Pacific Region and other foreign markeis. G.R.No.120082.11 September 196.261 SCRA 667

Page 3 of 3 MAKITA CO., INC. PHREPRESENTATIVE OFFICE

frowns against exemptions from taxalion and statutes granting the exemptions are thus construed strictissimi juris against the iaxpayer and government and liberally in favor of the taxpayer. But since taxes are what we pay for civilized society, or are the lifeblood of the nation, the law liberally in favor of the taxing authority. A claim of exemption from tax payments must be clearly shown and based on language in the law too "Accordingly, tax statutes must be construed strictly against the

plain to be mistaken. Elsewise stated, taxation is the rule, exemption therefrom is the exception. "

tax (VAT)-exempt taxpayer, is hereby denied for lack of legal basis. office, MAKITA CO.,INC.PHIL.REPRESENTATIVE OFFICE is a value-added In view of the foregoing, the request for certification that as a representative

Very truly yours,

aanlwa

Commissioner of Internal Revenue CAESAR R. DULAY 014697

3K-1-RSV K1-FR-17-0905