BIR Ruling [DA-517-98]

November 19, 1998 BIR RULING [DA-517-98] Metro Pacific Corporation 41-42/F Rufino Pacific Tower Ayala Avenue corner Herrera St. Makati City Attention: Mr . Fernando A . Flores Group Treasury Manager Gentlemen : This refers to your request on behalf of Bear Stearns Securities for a confirmation of your opinion that the payments it will receive in the form of interest from Metro Pacific Corporation arising from the latter's foreign currency loans is subject to the final income tax at the preferential rate of 15% on the gross amount of interest payments, pursuant to RP-US Tax Treaty. LLjur It is represented that Bear Stearns is a non-resident foreign corporation, organized and existing under the laws of the United States with principal office located at One Metrotech Center North, Brooklyn, New York, 11201; that Metro Pacific is a domestic corporation existing under the laws of the Philippines with principal place of business at 41st-42nd Floors of the Rufino Pacific Tower located at No. 6784 Ayala Avenue corner Herrera St., Makati City; that Metro Pacific issued on March 7, 1997, promissory notes USD-97-0001 to 0010 in favor of Bear Stearns where it obligated itself to pay the total sum of US Dollars: Ten Million Four Hundred Sixty Four Thousand Seven Hundred Twenty Nine & 29/100 ($10,464,729.29), at maturity date falling on March 6, 1998; and that the parties have agreed on a fixed gross interest rate of 8.5294% on a principal loan of US Dollars: Nine Million Seven Hundred Fifty Thousand ($9,750,000.00). In reply, please be informed that pursuant to Article 12 (1) and (2) of the R.P.-U.S. Tax Treaty stating " ARTICLE 12 " Interest "xxx xxx xxx 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 percent of the gross amount of such interest." xxx xxx xxx" the interest earnings of Bear Stearns in the Philippines shall be subject only to 15% on the gross amount thereof. 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. (BIR Ruling No. 43-95 dated February 24, 1995) LLcd Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)