BIR Ruling [DA-047-97]

January 30, 1997 BIR RULING [DA-047-97] SGV & Co. 6760 Ayala Avenue Makati City Attention: F.G . Tagao Tax Division Gentlemen : This has reference to your letter-request dated October 15, 1996, on behalf of your client, Dow Jones Telerate (Asia-Pacific) Limited, Philippine Branch [formerly Telerate Financial Information Network (Asia-Pacific) Limited, thereafter referred to as "Telerate"], a Hongkong corporation duly authorized to do business in the Philippines, for permission to allow it to pay its withholding tax on royalties for the years 1993, 1994, 1995 and for the months of January to April of 1996, in the total amount of P14,824,063.71, exclusively of surcharge, interest and compromise penalty. The said amount is equivalent to 25% of the gross amount of royalties of P59,296,254.85 paid by Telerate to Telerate International Company of the US (TIC), as required under Article 13 of the RP-US Tax Treaty. aisadc It is represented that your client had no intention to delay payment of the withholding tax due on the royalties; that the delay was caused by circumstances beyond its control; that in compliance with the decision of the Supreme Court in the case of CIR vs . CTA and Smithkline & French Overseas Co . (Phil . Branch) (G.R. No. L-54108, January 17, 1984) your client requested the external auditor of its Regional Office in Hongkong to issue a Certification relative to the share of the Philippine Branch in the Head Office expenses which Certification will be used in turn by the external auditors of your client in preparing the latter's financial statements; that there appears to be a misunderstanding and it was only very recently that your client was advised that a portion of what was expected to be its share in head office expenses is actually royalty subject to withholding tax; that the cause of the delay in payment is not in anyway attributed to your client, and as a result your client requests for waiver of surcharge, interest and compromise penalty incident to late payment in accordance with the general intent and spirit of Section 204 of the Tax Code. It is further represented that your client, Telerate, is not the subject of any pending examination for the above-stated years; that neither has this Office issued any findings nor assessments relative to your client's failure to withhold the tax and remit the same to the government; that Telerate is voluntarily paying its liability without the benefit of audit which if conducted would result in unnecessary costs and expenses to the government; and that by its voluntary offer to pay the liability, your client has saved the government unjustifiable administration and collection costs that come with audit and collection efforts. In reply, please be informed that based on the foregoing facts, and finding the reasons for the delay in the payment of withholding tax to be meritorious, this Office hereby grants your client's request to pay the total amount of P14,824,063.71 representing basic withholding tax on royalties for the years, 1993, 1994, 1995 and for the months of January to April of 1996, without the 25% surcharge but subject to 20% interest per annum and payment of compromise penalty, pursuant to Section 204 of the Tax Code, as amended. You are directed to advice your client to pay the basic withholding tax of P14,824,063.71, plus interest (computed to the date of payment) and compromise penalty within ten (10) days from the receipt of this letter. lexlib However, this will not constitute a waiver of our right to investigate the income tax return filed by your client for the aforestated period, and consequently assess and collect the corresponding that may still be found due from the subject taxpayer. (BIR Ruling No. DA-076-96 dated February 20, 1996) Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue