BIR Ruling

February 19, 1969 Mr. Bienvenido A. Tan, Jr. c/o Far Eastern University Manila S i r : This refers to your letter dated November 20, 1968 requesting information as to whether or not the sum of $50,000.00 received by your client, the Shin-Etsu Chemical Industry Co., Ltd. from Mabuhay Vinyl Corporation is subject to the withholding tax of 35% under Republic Act No. 5431. In reply, I have the honor to inform you as follows: Section 10 of Republic Act No. 5431, an Act amending among others, Section 53 of the National Internal Revenue Code (Re: Withholding Tax at Source) expressly provides that its provisions shall apply to income from taxable years beginning after June 30, 1968. Wherefore, if the income of any foreign corporation not engaged in trade or business in the Philippines is earned before June 30, 1968, the increased rate of 35% under said Act will not apply but the old rate of 30%. The sum of $50,000.00 having been credited to the account of or set apart for your client by Mabuhay Vinyl Corporation on April 25, 1968, the date of the compromise settlement fixing the said amount of $50,000.00 as full and complete settlement of all the claims of your client against Mabuhay Vinyl Corporation, the same shall be subject to the rate of withholding tax prevailing on April 25, 1968 during which so credited or set apart, although not then actually reduced to possession. In view of the foregoing facts, this Office believes and so holds that the old rate of 30% withholding tax provided for under Section 54 of the Tax Code, before its amendment by Republic Act No. 5431, shall be imposed on the $50,000.00 income of your client, the Shin-Etsu Chemical Industry Co. Ltd. from source within the Philippines. cdta Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue