Sycip Salazar Hernandez & Gatmaitan

March 7, 2008 BIR RULING [DA-144-08] DA047-01 Sycip Salazar Hernandez & Gatmaitan SSHG Law Center 105 Paseo de Roxas Makati City Attention: Atty. Rolando V. Medalla, Jr. and Atty. Cecily Nerisse C. Ramirez Gentlemen : This refers to your letter dated January 25, 2008 stating that your client, Interpublic Group of Companies, Inc. (the Company), is a corporation organized and existing under the laws of the State of Delaware, USA with office address at the 18th Floor Philamlife Tower, Paseo de Roxas, Makati City; that pursuant to the Omnibus Investments Code of 1987, as amended by Republic Act (R.A.) No. 8756 and its implementing rules and regulations, the Company applied with the Securities and Exchange Commission (SEC) for registration and license to establish an RHQ in the Philippines on September 25, 2007; that in its application, it was stated that the Company is engaged in the business of providing marketing, communications and advertising services, and in international trade with affiliates, subsidiaries, or branch offices in the Asia Pacific Region; that the Company further represented that the activities of the RHQ in the Philippines shall be limited to acting as supervisory, communications and coordinating center for its affiliates, subsidiaries or branches in the region, and that the said RHQ will not derive any income from sources within the Philippines and will not participate in any manner in the management of any subsidiary or branch office the foreign entity might have in the Philippines; that on September 27, 2007, the SEC granted the Company a Certificate of Registration and License to Operate a Regional Headquarters in the Philippines; and that RHQ currently does not have expatriates in its employ. In connection therewith, you now request confirmation of your opinion that the services rendered by the Company's RHQ are exempt from value-added tax (VAT). In reply thereto, please be informed that Section 4.109-1 (B) (1) (j) of Revenue Regulations No. 16-2005, as amended, provides that services rendered by regional or area headquarters established in the Philippines by multinational corporations which act as supervisory, communications and coordinating centers for their affiliates, subsidiaries or branches in the Asia Pacific Region and do not earn or derive income from the Philippines, shall be exempt from value-added tax. In relation thereto, Section 14 of Republic Act (R.A.) No. 8756 provides that regional or area headquarters shall be exempted from the value-added tax. The sale or lease of goods and property and the rendition of services to regional or area headquarters shall be subject to zero percent (0%) VAT rate as provided for in the National Internal Revenue Code. Accordingly, the activities of the proposed RHQ to be established by the Company shall be exempt from VAT pursuant to Section 4.109-1 (B) (1) (j) of Revenue Regulations No. 16-2005, as amended. On the other hand, the sale or lease of goods and property and the rendition of services to the RHQ shall be subject to zero percent (0%) VAT pursuant to Section 14 of R.A. No. 8756. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service