Film Royalties from the Use of Motion Picture Films or Tapes for Radio or TV Broadcasting Subject to 10% Withholding Tax

January 21, 1985 BIR RULING NO. 010-85 37-a 128-84 010-85 Gentlemen : This refers to your letter of August 7, 1984 requesting a ruling confirming that the royalties derived by your client, Lorimar Distribution International Inc. (LORIMAR), from the use of motion picture films, films or tapes for radio or television broadcasting are subject to a tax of 10% pursuant to Article 13(2)(b)(iii) of the RP-US Tax Treaty. It is represented that LORIMAR is a non-resident US corporation engaged in the business of film distribution; that it has entered into license contracts with local television stations and advertising agencies for the telecast of certain films; and that by virtue of these contracts, it grants local licensees the right to telecast films specified therein in consideration for the payment of rentals or license fees. In reply, please be informed that in view of the most-favored-nation clause [Article 13(2)(b)(iii)] of the RP-US Tax Treaty film royalties derived by a US resident from the Philippines shall not exceed the lowest withholding rate of Philippine tax which may be imposed on similar types of royalties paid to residents of a third State. Since the Philippines imposes a withholding tax rate of 10% on film royalties derived by Danish and Swedish residents under Article IX of the RP-Denmark and Article VIII of the RP-Sweden Tax Treaties, US residents will be subject to the same 10% rate. Therefore, this Office hereby confirms that the film royalties derived by Lorimar Distribution International Inc. from the use of motion picture films, films or tapes for radio or television broadcasting are subject to 10% withholding tax pursuant to Article 13(2)(b)(iii) of the RP-US Tax Treaty in relation to the RP-Denmark and RP-Sweden Tax Treaties. Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner