Sycip Salazar Hernandez & Gatmaitan

March 26, 2009 BIR RULING [DA-(ECB-009) 172-09] Section 25 (C); DA-179-07; 061-04 Sycip Salazar Hernandez & Gatmaitan Attorneys-at Law SSHG Law Centre 105 Paseo de Roxas, Makati City Attention: Rolando V. Medalla, Jr. and Angeline L. Chong Gentlemen : This refers to your letter dated November 05, 2008 requesting on behalf of your client, The Thomson Corporation Pte. Ltd.-Philippine Regional Operating Headquarters (TCPL-Philippines) (the "Company"), for confirmation on the 15% preferential tax rate on compensation income for various managerial and technical positions occupied by both alien and Filipino employees in the Regional Operating Headquarters (ROHQ) established by the Company in the Philippines. It is represented that the Company is a corporation organized and existing under the laws of Singapore, with office address at the 17/F Ayala Life-FGU Center, 6811 Ayala Avenue 1200, Makati City, Philippines; that on August 24, 2007, the SEC granted it a Certificate of Registration and License to Operate a Regional Operating Headquarters in the Philippines, pursuant to the Omnibus Investments Code of 1987; and that the Company currently employs 926 employees (the corresponding job titles, job description of which are hereto attached as Annex "C" with thirteen (13) pages forming part of this ruling bearing the signatory's initial on each page). In reply thereto, please be informed that Section 25 (C) of the Tax Code of 1997 provides that: "(C) Alien Individual Employed by Regional or Area Headquarters and Regional Operating Headquarters of Multinational Companies. There shall be levied, collected and paid for each taxable year upon the gross income received by every alien individual employed by regional or area headquarters and regional operating headquarters established in the Philippines by multinational companies as salaries, wages, annuities, compensation, remuneration and other emoluments, such as honoraria and allowances, from such regional or area headquarters and, regional operating headquarters, a tax equal to fifteen percent (15%) of such gross income: Provided, however, That the same tax treatment shall apply to Filipinos employed and occupying the same position as those of aliens employed by these multinational companies. . . ." EADCHS Corollarily, 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 and Section 10 of the Rules and Regulations Implementing Article 61 of R.A. No. 8756 provide that alien executives occupying managerial and technical positions employed by the regional or area headquarters and regional operating headquarters of multinational companies shall be subject for each taxable year upon their gross income received as salaries, wages, annuities, compensation, remuneration and emoluments to a final tax equal to fifteen percent (15%) of such gross income and that the same tax treatment, is applicable to Filipinos employed and occupying the same positions as those aliens, regardless of whether or not there is an alien executive occupying the same position. However, qualified Filipino employees 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 tax rates under Sections 2.78 and 2.79 of Revenue Regulations No. 2-98 shall apply. Since the positions of the Filipino's and aliens personnel require technical proficiency and initiative from the individuals occupying such position, the said employees shall be subject to either the preferential tax rate of 15% or to the regular tax rate based on their taxable income, regardless of whether there is an alien similarly occupying such technical or managerial positions. 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. TEAICc Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service