BIR Ruling [DA-467-99]

August 17, 1999 BIR RULING [DA-467-99] Sekisui Jushi Philippines Corporation Lot 11 Phase II Camelray Industrial Park Canlubang, Calamba, Laguna Attention: Mr . Hiroshi Matsui President Gentlemen : This refers to your letter dated March 24, 1999 requesting for a ruling that the interest payments made to Sekisui Jushi Corporation (SJC) by Sekisui Jushi Philippines Corporation (SJPC) is subject to the preferential tax rate of 15% withholding tax pursuant to Article 11 of the RP-Japan Tax Treaty. It is represented that SJPC is a company registered with the Philippine Export Zone Authority (PEZA) with your parent company, SJC, located in Japan; that SJPC obtained interest-bearing loans from its parent company, SJC, in the amounts of US $400,000.00 on May 20, 1997 and US $500,000.00 on June 19, 1997; that these loans have been paid on October 14, 1998; that SJPC obtained new interest-bearing loans in the amounts of Y48,140,000.00 and Y60,175,000.00; and that in support of your request, you submitted to this Office the following documents: 1) duly accomplished BIR Application Form TC-001; 2) SEC Registration and Articles of Incorporation of Sekisui Jushi Philippines Corporation; 3) Copies of Loan Agreements between Sekisui Jushi Corporation and Sekisui Jushi Philippines Corporation; 4) Certificate of Authentication. LibLex In reply, please be informed that Article 11(2)(b) provides as follows: "Article 11 "1. Interest arising in a contracting State and paid to a resident of the other Contracting State may be taxed in that other Contracting State. "2. However, such interest may also be taxed in the Contracting State in which it arises, and according to the laws of that Contracting State, but if the recipient is the beneficial owner of the interest the tax so charged shall not exceed: "a. 10 per cent of the gross amount of the interest if the interest is paid in respect of Government securities, or bonds or debentures; "b. 15 per cent of the gross amount of the interest in all other cases." Accordingly, the interest payments to be remitted by SJPC to SJC shall be subject to the 15% preferential tax rate pursuant to the aforequoted provisions of the RP-Japan Tax Treaty. (BIR Ruling Nos. 138-94 dated Sept. 19, 1994; DA-382-98 dated Aug. 24, 1998; DA-098-99 dated 2-15-99) LibLex 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 as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)