RMC No. 63-2023 — Revokes BIR Ruling Nos. 038-2001 and 046-1995

BUREAU OF INTERNAL REVENUE REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE National Office Building Quezon City RECORDS MGt. DiVISION TUC MAY 31 ZU23 U 83 AM

MAY 3 U 2023

REVENUE MEMORANDUM CIRCULAR (RMC) NO. 63 - 2023 1

SUBJECT Revocation of BIR Ruling Nos. 038-2001 and 046-1995

TO All Internal Revenue Officials, Employees and Others Concerned

and existing"rules and'regulations promulgated by the Securities and Exchange Commission ("SEC") and is performing activities that are proprietary in nature. Therefore, CDC is entitled in lieu of local and national internal revenue taxes. business enterprise"because it was.formed in accordance with the Philippine Corporation Law to the same privifeges as other enterprises operating within the Clark Special Economic Zone ("CSEZ") such as the five percent (5%) preferential tax rate based on gross income earned, 10, 2001) and 046-1995 (dated March 3, 1995) which ruled. that CDC is considered as a This Circular is being issued to revoke BIR Ruling'Nos. 038-2001 (dated September

entrusted with the. responsibility of carrying out regulatory functions. As such, it does not stand on equal'footing with business enterprises operating within CSEZ, thereby precluding it performing activities that are proprietary in nature, the fact still remains that it is a GOCc from claiming the same.privileges available.to them. It has been observed that, while it- is true that:CDC is a private corporation and

- with functionstelating to public needs whether governmental or proprietary in nature, and : vested with functions relating to public needs and owned by the Government of the instrumentalities either wholly or, where applicable as in the case of stock corporations, to the Philippines through BCDA. CDC was "established to manage the CSEZ.2 CDC has the owned. by..the"Government of the Republic of the Philippines directly or through its following powers and functions, among others, under Section 13 of RA No. 7916: 3 extent of at least a majority of its outstanding capital stock.1 CDC is a stock corporation :A GQEC-refers to any agency organized as a stock or nonstock corporation, vested

a. to operate, administer, manage and develop the CSEZ according to the b. to register, regulate and supervise the enterprises in the CSEZ in an efficient C 'principles and provisions under the law; to coordinate with local government units and exercise general supervision and decentralized manner:

d to construct, acquire, own, lease, operate and maintain on its own or through over the development, plans, activities and operations of the CSEZ:

contract, franchise, license, bulk purchase from private sector or joint venture adequate facilities and infrastructure: and

3 On February 21, 1995, EPZA became PEZA due to the enactment of Republic Act No. 7916. 2 Section 1, Executive Order No. 80, series of 1993, April 3; 1993. :Republic Act No. 10149, An Act to Promote Financial Viability and Fiscal Discipline in Government-Owned or -Controlled Corporations and to Strengthen the Role of the State.in its Governance and Management to Make Them More Responsive to the Needs of Public Interest and For Other Purposes, June 6, 2011.

to create, operate and/or contract such agencies and functional units or offices of the.authority as it may deem necessary.

of its formation or the nature of its operations. Consequently, its income :shall be subject to CDC is a GOCC that operates and performs as a regulatory agency. Thus, unless there is a law that expressly states otherwise, CDC must be treated on par with other GOCCs regardless income tax provided in Section 27(C) of the Tax Code. In light of the above, despite being structured as a stock corporation, it is evident that Aw X

incentives becomes limited only to business enterprises registered with IPAs. Bureau's position remains unchanged. It must be noted that upon passage'of CREATE Law. Section 12(c) of RA No. 7227, as amended, was repealed and the availment of fiscal Assuming arguendo that CDC is correctly treated as a business enterprise, -the

respective special laws;Hence, it clear that, in the eyes of the Legislature, an entity may Code explicitly states that CDC is an IPA. different purposes-and functionalities. RBE refers to any individual, partnership, corporation. Philippine branch of a foreign corporation, or other entity organized and existing under the Philippine laws and registered with an IPA whether inside or outside the zones, which are granted fiscal and/or non-fiscal incentives to the extent of their approved registered project or to government entities created by law, executive order, decree or other issuance, in charge of promoting investments, granting and administering fiscal and/or non-fiscal incentives, and either be classified as an IPA or an RBE, but.can never be both. Section 293(H) of the Tax activity under the Strategic Investment Priority Plan ("SIPP"). On the other hand, IPAs refer overseeing the operations of the different economic zones and freeports in accordance their Under the CREATE Law, IPAs and RBEs are two separate and distinct entities with

it .is classified as an IPA as defined and contemplated under the CREATE Law, its .IRR and other related rules and regulations. Therefore, CDC cannot avail of the fiscal and non-fiscal incentives which are exclusively granted to RBEs. Such being the case, while CDC is performing functions that are proprietary in nature,

invalidated, and ail revenue issuance inconsistent with this Circular are deemed repealed without prejudice to Section 246 of the. Tax Code.. In this regard, BIR. Ruling Nos. 038-2001 and 046-1995 are hereby revoked and

possible publicity. All revenue officials and employees are enjoined to give this Circular the widest

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K-I Compissioner of Internal Revenue 008547

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