STMicroelectronics Asia Pacific Pte. Ltd.

October 30, 2008 BIR RULING [DA-(ECB-007) 370-08] Section 25 (C); DA-389-2007 dtd. 7/17/07 STMicroelectronics Asia Pacific Pte. Ltd. Unit 2302-2303 Raffles Corp. Center Emerald Ave., Ortigas Center Pasig City Attention: Lazaro "Dondon" Ifurong Country Manager & Regional Office Manager Gentlemen : This refers to your letter dated October 13, 2008 requesting a confirmation of your opinion that alien employees of a representative office of a multinational corporation are entitled to the 15% withholding tax on their gross income and that the same tax treatment is equally applicable to Filipinos employed with equal qualification under Executive Order 226 and occupying the same position as those aliens employed by these multinational companies pursuant to Section 25 (C) of the Tax Code of 1997. Documents submitted disclosed that STMICROELECTRONICS ASIA PACIFIC PTE. LTD. is a foreign company organized and existing under the laws of Singapore; that it is duly licensed by Philippine Securities and Exchange Commission on November 7, 2006 with Company No. FS-200617062 in accordance with the Corporation Code of the Philippines and the Foreign Investments Act of 1991, to establish its representative office in the Philippines under the name STMICROELECTRONICS ASIA PACIFIC PTE. LTD. Manila Liaison Office tasked to act as liaison or representative office for its principal and to promote its products; that the ST Local representation in the Philippines has evolved with: 1) the development of a significant sales office in Manila; 2) the creation of a GOBM Local Team located in the premises of APM Regional Office; 3) the appointment of Lazaro "Dondon" Ifurong, a Filipino (formerly the ST Country Manager of ST Siccily, Italy) as Philippines Country Manager; 4) and he (Lazaro "Dondon" Ifurong) was equally appointed as ST Alabang Regional Office Manager; 5) further, the appointment to technical position of Omar M. Harmon as Senior Application Engineer and Jeffrey Judi as Field Support Engineer. In reply, please be informed as follows: CASIEa Section 2.57.1 (D) of Revenue Regulations No. 2-98, as amended by Revenue Regulations No. 6-2001, and as further amended by Revenue Regulations No. 12-2001, now reads: "(D) Income Derived by Alien Individuals Employed by Regional or Area Headquarters and Regional Operating Headquarters of Multinational Companies. "The same tax treatment is applicable to Filipinos employed and occupying the same positions as those aliens employed by regional or area headquarters and regional operating headquarters of multinational companies, regardless of whether or not there is an alien executive occupying the same position, provided, that such Filipinos shall have the option to be taxed at either 15% of gross income or at the regular tax rate on their taxable income in accordance with the Tax Code of 1997. In case of the latter, the withholding rates under Sections 2.78 and 2.79 of Revenue RegulationsNo.2-98 shall apply. Based on the foregoing, the income payments to expatriates would thus be subject to the preferential rate of 15% of gross income, pursuant to Revenue Regulations 2-98 as amended. On the other hand, Mr. Lazaro "Dondon" Ifurong, the Filipino, Philippines ST Country Manager and likewise, the ST Alabang Regional Office Manager, has the option to be taxed at either 15% of his gross income pursuant to Section 25 (C) or the graduated tax rates of 5%-32% in accordance with Section 24 of the Tax Code of 1997. Likewise, the other Filipino employees, namely: Omar M. Harmon and Jeffrey Judi, occupying the position of Sr. Application Engineer and Field Support Engineer, respectively, are also given the same option as that of Mr. Lazaro "Dondon" Ifurong. HDICSa Accordingly, inasmuch as Mr. Lazaro "Dondon" Ifurong, Omar M. Harmon and Jeffrey Judi had opted for the preferential rate of 15% tax on gross income, they shall be taxed at their preference. 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. HaIATC Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service