BIR Ruling [DA-540-99]

September 21, 1999 BIR RULING [DA-540-99] Joaquin Cunanan and Co. 14th Floor, Multinational Bancorporation Centre 6805 Ayala Avenue Makati City Attention: Atty . George J . Lavadia Principal, Tax and Corporate Services Gentlemen : This refers to your letter dated March 26, 1998 requesting on behalf of your client, Integrated Device Technology (Philippines), Inc. (IDT) for the availment of the preferential tax treaty rate of 15% final withholding tax relative to its interest payment on the US Dollar loan obtained by it from the Integrated Device Technology, Inc.-U.S. (IDT-US). LexLib It appears that IDT is a corporation organized and existing under the laws of the Philippines; that IDT-US is a non-resident foreign corporation organized and existing under the laws of the United States of America; that on June 1995 IDT obtained a loan from IDT-US with an initial principal in the amount of US$250,000.00; and that such amount will be increased subsequently as stipulated in the loan agreement. In reply thereto, please be informed that the interest payment made to IDT-US is subject to the 15% preferential tax treaty rate pursuant to Article 12(2) of the Philippines-United States Tax Treaty, viz: "ARTICLE 12 (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 State 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." Accordingly, your opinion that the interest to be paid by IDT in favor of IDT-US shall be subject to the preferential tax rate of 15% pursuant to the aforequoted provisions of the Philippines-United States Tax Treaty, is hereby confirmed. (BIR Ruling No. DA-517-98 dated November 19, 1998). prcd 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, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)