BIR Ruling

December 9, 1966 Kaiser Jeep International Corporation 300 Lakeside Drive, Oakland, California, U.S.A. Attention: Mr . W . D . Pierson S i r : This refers to your letter dated July 14, 1966 requesting information on the following: "1. What regulation, if any, are imposed on royalty payments by a firm in the Philippines to a U.S. corporation? LexLib "2. What is the applicable tax rate, if any, on royalty remittances to the United States?" In reply, I have the honor to inform you as follows: (a) Section 30(a)(1) of the National Internal Revenue Code treats royalty payment made by a local firm to a non-resident foreign corporation as deductible business expenses on the part of the domestic firm. Section 37(a)(4) of the same Code, as amplified by Section 156 of Revenue Regulations No. 2, likewise treat such royalty payment as income of the non-resident U.S. Corporation from sources within the Philippines subject to the Philippine Income Tax. (b) The applicable tax rate of non-resident foreign corporation, not engaged in trade or business in the Philippines, on its gross income from all sources (including royalty income) in the Philippines is 30% of such amount pursuant to Section 24(b)(1) of the Tax Code (BIR Ruling, dated June 29, 1960). (c) There shall be deducted and withheld by the local corporation remitting such royalty to the non-resident U.S. Corporation a tax equal to 30% of such amount as provided under Section 54 of the National Internal Revenue Code, as amplified by Section 205 of Revenue Regulations No. 2. aisadc Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue