Interest Payments to be Made by a Philippine Resident to RBC Finance B.V. in Consideration of the Loan Which the Latter Will Make Available to the Former Subject to 10% Withholding Tax pursuant to the RP-Netherlands Tax Treaty

May 15, 1997 BIR RULING NO. 057-97 28 (b) (6) 000-00 057-97 Sycip Gorres Velayo & Co. 6760 Ayala Avenue Makati City Attention: Mr . Cornelio C . Gison Gentlemen : This refers to your letter dated 14 February, 1997 requesting confirmation of your opinion that interest payments to be made by a Philippine resident to your client, RBC Finance B.V., in consideration of the loan which the latter will make available to the former, will be subject to 10% withholding tax pursuant to the provisions of the RP-Netherlands Tax Treaty. It is represented that RBC Finance B.V. ("RBC") is a non-resident foreign corporation organized and existing under the laws of Netherlands; that it is a special finance company regulated by the Bank of England which provides loans to corporate borrowers by entering into financial transactions, including but not limited to financial leases, and transactions in connection therewith; and that it intends to enter into a financing transaction with a Philippine resident whereby RBC shall provide a loan to the Philippine resident and the latter shall be obligated to pay interest to RBC. In reply thereto, please be informed that Article 11(1) and (2) (a) (ii) of the RP-Netherlands Tax Treaty provides as follows: "1. Interest 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 interest may be taxed in the State in which it arises and according to the laws of that State, but if the recipient is the beneficial owner of the interest the tax so charged shall not exceed: a) 10% per cent of the gross amount if such interest is paid: xxx xxx xxx" (ii) on any loan of whatever kind granted by a bank, or any other financial institution, xxx xxx xxx" Accordingly, your opinion that interest payments which a Philippine resident shall pay to RBC Finance B.V. shall be subject to the 10% withholding tax rate pursuant to the aforequoted provisions of the RP-Netherlands Tax Treaty is hereby confirmed. This ruling is being issued on the basis of the 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. cdta Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue