S.C. Johnson Philippines ROHQ

December 23, 2008 BIR RULING [DA-(ECB-009) 569-08] Section 25 (C); DA-179-07; 061-04 S.C. Johnson Philippines ROHQ 6371 Estrella Street, Makati City Attention: Leah F. Jose Finance Implementation Team Manager (Accounting Manager/Controller) Gentlemen : This refers to your letter dated December 17, 2008 requesting for confirmation on the 15% preferential tax rate on compensation income for various managerial and technical positions occupied by both expats/alien executives and Filipinos in S.C. Johnson Philippines ROHQ. AcSEHT It is represented that S.C. Johnson Philippines ROHQ is duly registered with the Securities and Exchange Commission (SEC) under SEC Registration No. FS200815730; that it is duly established pursuant to the Omnibus Investments Code of 1987, as amended by Republic Act No. 8756, as the regional operating headquarters of S.C. Johnson & Son Pte. Ltd., a multinational company organized and existing under the laws of Singapore; and that the following positions of S.C. Johnson Philippines ROHQ (Asia Pacific Shared Service Center) to be subjected to the 15% preferential tax rate on compensation income and 15% rate on fringe benefit tax, viz. : 1. Shared Service Center Director 2. Supply Chain Director 3. Finance Director 4. BPT (Business Process Technology) Director 5. Human Resource Director 6. Functional Process Implementation Managers (Finance, Supply Chain, BPT Implementation Teams) 7. Functional Process Implementation Team Managers (Finance, Supply Chain, BPT Implementation Teams) 8. Human Resource Manager 9. Accounting Manager/Controller 10. Accounts Payable Manager 11. Treasury Manager 12. Customer Service Financial Services Manager 13. Customer Service Manager 14. Cost Managers-Virtual IMC 15. Category Planning Managers 16. Import/Export Manager 17. BPT (IT) Senior Consultant Managers 18. BPT (IT) Lead Managers 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. . . ." 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 position 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 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. ADTEaI Since the positions of the S.C. Johnson Philippines ROHQ personnel enumerated above clearly 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. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service