BIR Clarifies Creditable Withholding Tax Exemption of BOI-Registered Enterprise

On 14 March 2024, the Bureau of Internal Revenue (“BIR”) issued BIR Ruling No. OT-020-2024 which confirmed that revenues exclusively derived from the registered activity or project of Basic Necessity, Inc. (“BNI”), an entity registered with the Philippine Board of Investments (“BOI”), is exempt from creditable withholding tax (“CWT”). The ruling was issued in response to BNI’s request for a confirmatory ruling that it is exempt from CWT imposed under Revenue Regulations (“RR”) No. 2-98, as amended, by virtue of its registration.

BNI is a domestic corporation duly organized and existing under the laws of the Republic of the Philippines and registered with the Securities and Exchange Commission. Pursuant to its primary purpose, BNI is engaged in the production of bean sprouts and alfalfa sprouts. BNI is likewise duly registered with the BOI. As a duly qualified domestic market enterprise, BNI was granted incentives by the BOI subject to the terms and conditions of its registration agreement. 

The BIR confirmed that under Section 2.57.5(B)(2) of RR No. 2-98 as amended, implementing the Section 57(B) of the National Internal Revenue Code (Tax Code) of 1997, as amended, BNI is exempt from CWT on revenues generated from its registered project or activity duly registered with the BOI for a period of 6 years beginning June 2023 or the actual start of commercial operations within 3 years from the date of registration, whichever is earlier, but in no case earlier than the date of registration or activity with the BOI, pursuant to Executive Order No. 226, otherwise known as the ‘Omnibus Investments Code of 1987’, and Section 2.57.5(B)(2) of RR No. 2-98, as amended. The BIR reiterated that only revenues exclusively derived from the registered activity or project shall be exempt from CWT. 

Finally, the BIR also stated that BNI’s entitlement to CWT exemption for its BOI registered project is subject to compliance with the provisions of the specific terms and conditions of its certificate of registration with BOI.