BIR Ruling [DA-090-96]

February 28, 1996 BIR RULING [DA-090-96] Kosei (Asia) Pacific, Inc. 105 Commerce Road Laguna Technopark Bian, Laguna Attention: Ms . Gloria A . Santos Corporate Secretary Gentlemen : This refers to your letter dated November 13, 1995, requesting for relief from double taxation relative to your remittance of royalty payments to Kosei Aluminum Company, Ltd. of Japan. It appears that you and Kosei Aluminum Co., Ltd. of Japan have entered into a technical assistance agreement under which you are granted an exclusive license to use the Perfect Ordering System for the manufacture of aluminum alloy wheels; that you are a BOI-registered enterprise on a pioneer status under Certificate of Registration No. EP 93-285; that the Technical Assistance Agreement and its amendments are registered with the Technology Transfer Registry of the Bureau of Patents, Trademarks and Technology Transfer of the Department of Trade and Industry under Certificate of Registration No. 1637-A; and that under the said technical assistance agreement, you will pay Kosei Aluminum Co., Ltd. of Japan 5% royalty based on net sales price. In reply, please be informed that pursuant to Article 12, paragraphs (3) and (4) of the RP-Japan Tax Treaty reading: "Article 12 "1) . . . "2) . . . "3) Notwithstanding the provisions of paragraph (2), the amount of tax imposed by the Philippines on the royalties paid by a company, being a resident of the Philippines, registered with the Board of Investments and engaged in preferred pioneer areas of investment under the investment incentive laws of the Philippines to a resident of Japan, who is the beneficial owner of the royalties, shall not exceed 10 percent of the gross amount of the royalties. "4) The term "royalties" as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematographic films and films or tapes for radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for the used of, or the right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience." the royalties arising in the Philippines and payable by you to Kosei Aluminum Co., Ltd. of Japan are subject to Philippine income tax at the rate of 10% which must be withheld before actual remittance to your company's licensor. (BIR Ruling No. 026-94 dated January 21, 1994) This ruling is being issued on the basis of the foregoing representation and will be revoked if it turns out later that the facts are not as represented. Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)