Payments to be Made to Jan de Nul Singapore Pte. Ltd. Under a Contract Agreement for Reclamation Project and Dredging Exempt from Philippine Income/withholding Tax pursuant to the RP-Singapore Tax Treaty and Consequently from the 35% Withholding Tax

April 14, 1997 BIR RULING NO. 047-97 28 (b) (6) 000-00 047-97 D.M. Wenceslao & Associates, Inc. 306 E. Rodriguez Sr. Boulevard Quezon City Attention: Ms . Emma A . Paras Senior Vice President Gentlemen : This refers to your letter dated July 31, 1996 requesting for a ruling that payments to be made to Jan de Nul Singapore Pte. Ltd. (Jan de Nul) under a Contract Agreement for Reclamation Project and Dredging is exempt from Philippine income/withholding tax pursuant to Article 5(2) (I) of the RP-Singapore Tax Treaty and consequently from the 35% withholding tax provided for in Section 50(a) in relation to Section 25(b) (1) of the Tax Code, as amended. Documents submitted to this Office disclosed that on March 1, 1996 a Contract Agreement for Dredging and Reclamation Works was entered into by and between D.M. Wenceslao and Associates, Inc. a domestic corporation and Jan de Nul, a non-resident foreign corporation based in Singapore for the reclamation works and Dredging of Phase III-A of CBP I-Islands B and C in Paraaque, Metro-Manila which involved a contract price of US$12,825,000; that Jan de Nul has no permanent establishment in the Philippines and that the whole project was completed for less than 183 days or on June 30, 1996. In reply, please be informed that pursuant to Article 7 (Business Profit) in relation to Article 5 of the RP-Singapore Tax Treaty, provides as follows: "Article 7 "Business Profits "(1) The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on or has carried on business as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to that permanent establishment. Moreover, Article 5(1) and (2) of said treaty provides, viz: "Article 5 "Permanent Establishment "(1) For the purposes of this Convention, the term "permanent establishment" means a fixed place of business in which the business of the enterprise is wholly or partly carried on. "(2) The term "permanent establishment" includes specially but is not limited to: a) A seat of management; b) A branch; c) An office; d) A store or other sales outlet; e) A factory; f) A workshop; g) A warehouse, in relation to a person providing storage facilities for others; h) A mine, quarry, or other place of extraction of natural resources; i) A building site or construction or assembly project or installation project or supervisory activities in connection therewith, provided such site, project or activity continues for a period more than 183 days; and j) The furnishing of services, including consultancy services, by a resident of one of the Contracting States through employees or other personnel, provided activities of that nature continue (for the same or a connected project) within the other Contracting State for a period or periods aggregating more than 183 days. Under the aforequoted provisions of the RP-Singapore Tax Treaty, Jan de Nul does not have a permanent establishment in the Philippines. Accordingly, the business profits derived by Jan de Nul from the contract it entered into with D.M. Wenceslao and Associates, Inc., are not subject to Philippine income tax and consequently to the withholding tax under Section 25(b) (1) in relation to Section 50(a) of the Tax Code, as amended. 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, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue