BIR Ruling [DA-222-99]

April 13, 1999 BIR RULING [DA-222-99] Joaquin Cunanan & Co . 14/F Multinational Bancorporation Centre 6805 Ayala Avenue, Makati City Attention: Ms. Tomasa H. Lipana Managing Partner Tax and Corporate Services Gentlemen : This refers to your letter dated February 16, 1998 requesting confirmation of your opinion that the interest payments to be remitted by Integrated Device Technology Realty Holdings, Inc. (IDT Realty) on its US$ loan obtained from Integrated Device Technology, Inc. (IDT-US), a non-resident foreign corporation is subject to the preferential tax rate of 15% pursuant to Article 12(2) of the RP-US Tax Treaty. It is represented that IDT Realty is a corporation organized and existing under the laws of the Philippines, while IDT-US is a non-resident foreign corporation organized and existing under the laws of the United States of America; that on October 4, 1995, IDT Realty obtained dollar loans from IDT-US amounting to US$1,731,035.54; that said loan which was used to acquire real property from Carmelray Industrial Park, Calamba, Laguna is payable over a period of twenty (20) years and is subject to the payment of interest at the rate of eight per cent (8%) per annum or at such rate as determined by the parties every five (5) years thereafter based upon the prevailing market rates; that IDT-US is not doing business in the Philippines; and that in support of your request, you submitted to this Office the following documents: 1) Copies of duly accomplished BIR Application Form TC-001; that 2) Certification of Non-Registration of IDT-US from the Securities and Exchange Commission; and 3) Copy of the Loan Agreement between IDT-US and IDT Realty Holdings, Inc. In reply, please be informed that under Article 12(2) of the RP-US Tax Treaty, viz : AcHCED "Article 12 Interest "1. Interest derived by a resident of one of the Contracting States from sources within the other Contracting State may be taxed by both Contracting States. "2. Interest derived by a resident of one of the Contracting States from sources within the other Contracting State shall not be taxed by the other Contracting State at a rate in excess of 15% of the gross amount of such interest. "3. . . . "4. . . . "5. . . . "6. . . . "7. . . ." your opinion that the applicable withholding tax rate on the aforementioned US$ loan shall be 15% of the gross amount of the interest payment to be remitted by IDT Realty to IDT-US is hereby confirmed. (BIR Ruling No. 142-95 dated September 13, 1995) HIACEa 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. Ver truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)