BIR Ruling No. 062-83

April 15, 1983 BIR RULING NO. 062-83 Gentlemen : This refers to your letter dated March 23, 1983 requesting exemption from the payment of withholding tax of interest accruing on the balance of the foreign obligation of Asia Industries, Inc. (AII) to a syndicate of foreign banks, which obligation was assumed by the National Development Company (NDC). cdt It is represented that in the Memorandum of Agreement dated December 29, 1982 entered into by and between AII and NDC, the latter agrees to assume the former's total obligations relating to its holdings in USIPHIL; that as a consideration for the assumption by NDC of the Usiphil obligations, the following arrangements were agreed to by the parties: (a) Payment by NDC of the purchase price for the Usiphil shares under the Deed of Absolute Sale of shares of stock dated December 29, 1982; (b) Promissory Note by AII in favor of NDC for the foreign exchange credit granted by Bank of America on December 17, 1982, to reduce the foreign exchange differential absorbed into the December 27, 1982 promissory note; (c) Payment by NDC of additional paid-in-capital (capital in excess of par value) in AII. In reply thereto, I have the honor to inform you that for having assumed the obligation to pay AII's loan to a syndicate of foreign banks, NDC became directly liable for the payment of the withholding tax on the interest and charges thereon. However, under Section 12(a) of Presidential Decree No. 1648, as amended otherwise known as the Revised NDC Charter which provides as follows: "Section 12. Foreign Loans; Republic Guarantee (a) The company is hereby authorized to contract loans, credits and other indebtedness from time to time, in any convertible foreign currency or capital goods, from foreign governments, or any international financial institutions or fund resources or any other entities, on such terms and conditions it shall deem appropriate for the accomplishment of its purposes and to enter into and execute agreements and other documents specifying such terms and conditions. The loans, credits and indebtedness contracted by the company under this paragraph (a) and all payments, whether of principal, interest, other charges or otherwise, due in connection therewith, shall be exempt from all direct and indirect taxes, including withholding taxes on payments of interest, and from all fees, impost, other charges and restrictions presently imposed or to be imposed by the Republic of the Philippines or any of its agencies and political subdivisions (Emphasis supplied) NDC is exempt from all direct and indirect taxes, including the withholding tax on its interest payments on the balance of the aforesaid foreign obligations of AII to the syndicate of foreign banks. Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner Bureau of Internal Revenue