Interest to be Paid by Your Client on a Loan to be Made to it by Visayas Power Capital Corporation (VPCC) as well as Other Philippine Source Income Received on Such Loan, Exempt from Tax under the RP-US Tax Treaty

January 24, 1996 BIR RULING NO. 011-96 28 (b) (6) 000-00 011-96 Sycip Salazar Hernandez & Gatmaitan 105 Paseo de Roxas 1200 Makati City Attention: Attys . Ernesto S . Taio, Jr . and Hector M . de Leon, Jr . Gentlemen : This refers to your letter dated May 26, 1995, requesting on behalf of your client, Visayas Geothermal Power Company (VGPC), confirmation of your opinion that the interest to be paid by your client on a loan to be made to it by Visayas Power Capital Corporation (VPCC) as well as other Philippine source income received on such loan, will be exempt from tax under the RP-US Tax Treaty. cdta It is represented that VGPC is a Philippine partnership while VPCC is a corporation organized under the laws of the State of Delaware, United States of America; that the loan (OPIC Insured Loan) in the maximum aggregate principal amount of US$135,000,000 is being made to VGPC pursuant to a credit agreement (OPIC Insured Loan) dated November 10, 1994 and insured by Overseas Private Investment Corporation (OPIC) under OPIC Contract of Insurance No. E187; and that the OPIC Insured Loan is being made in connection with the construction of the 231 MW Malitbog Geothermal power project being built on a BOT basis in Leyte. In reply, please be informed that pursuant to paragraph 4(b), Article 12 of the RP-US Tax Treaty, interest derived by a resident of one of the Contracting States with respect to debt obligations guaranteed or insured by the Contracting State or an instrumentality thereof, shall be exempt from tax by the other Contracting State. Accordingly, since the loan to be made by VPCC to VGPC is guaranteed by Overseas Private Investment Corporation which is an instrumentality of the United States under paragraph (b), Article 12 of the said RP-US Tax Treaty, your opinion that the interest and other income on such loan to be paid by your client to VPCC is exempt from Philippine income tax and consequently from the withholding tax, is hereby confirmed. This ruling is subject to verification and the same shall be revoked if after verification, the facts are different from those represented. cdti Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue