Application for Tax Treaty Relief in Compliance with Revenue Memorandum Order No. 10-92

April 3, 1997 BIR RULING NO. 038-97 28 (b) (6) 000-00 038-97 Joaquin Cunanan & Co. 8th Floor, BA-Lepanto Bldg. 8747 Paseo de Roxas Makati City Attention: Mr . Heliodoro D . Tingson, Jr . Senior Manager Tax and Corporate Services Department Gentlemen : This refers to your letter dated June 25, 1996 applying for and in behalf of your client International Starch & Chemical Co., Inc. (ISCCI), tax treaty relief in compliance with Revenue Memorandum Order No. 10-92. It is represented that ISCCI, a corporation organized under the laws of the Philippines, entered into a Service Agreement with National Starch & Chemical International B.V. (NSCI), a corporation duly organized and existing under the laws of the Netherlands whereby the latter granted to the former the exclusive license to the use in the Philippines of a certain technology relating to the manufacture and sale of various adhesives, resins, specialty chemical, starch, and similar products. In consideration for the grant of the technology, NSCI becomes entitled under the Agreement to receive a royalty equivalent to 3-% of ISCCI'S total net sales value during every quarter that the agreement is in effect. In reply, please be informed that under Article 12 (2) (b) of the RP-Netherlands Tax Treaty reading: "Article 12 ROYALTIES "1. Royalties arising in one of the States and paid to a resident of the other State may be taxed in that other State. "2. However, such royalties may also be taxed in that State in which they arise and according to the laws of the State, but if the recipient is the beneficial owner of the royalties, the tax so charged shall not exceed: "(a) 10 percent of the gross amount of the royalties where the royalties are paid by an enterprise registered, and engaged in preferred areas of activities in that State; and "(b) 15% of the gross amount of the royalties in all other cases." royalties paid to NSCI are subject to the Philippine income tax at the rate of 15%. cdt Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue