Royalties Paid by Columbian Carbon Phil., Inc. to Columbian International Chemical Co. U.S.A. Subject to 15% Tax

January 17, 1984 BIR RULING NO. 009-84 37-a-000-00-009-84 Gentlemen : This refers to your letter dated March 21, 1983 requesting confirmation that the royalty payments of your client, Columbian Carbon Philippines, Inc. (CCPI), to Columbian International Chemical Company U.S.A. (CICC) are subject to the 10% withholding tax in accordance with Article 13(2)(b)(iii) of the RP-US Tax Treaty in relation to the RP-Austria Tax Treaty. It is represented that CPPI is a domestic corporation duly registered with Board of Investments as preferred pioneer enterprise; and that CICC, the parent company of CCPI, is a corporation organized under the laws of the United States. In reply, please be informed that the most-favored-nation clause provided for under sub-paragraph (iii) of the above-mentioned Article in relation to RP-Austria Tax Treaty, Article 12, par. 3, providing for 10% withholding tax on royalties paid to a resident of Austria by a Philippine BOI registered pioneer enterprise, is not applicable. The tax consequences of royalty payments under the two treaties are not under "similar circumstances." Under the RP-Austria Tax Treaty, there is a matching credit of 15% of the gross amount of the royalties (Art. 23, par. 3); while under the RP-US Tax Treaty there is no similar credit. Therefore, the tax on royalties paid by CCPI to CICC is 15% of the gross amount of such royalties pursuant to Art. 13, par. 2(b)(ii) of the RP-US Tax Treaty. Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner