Royalties Derived from Use of Motion Picture Films or Films or Tapes for Radio or TV Broadcasting Subject to Withholding Tax

May 3, 1985 BIR RULING NO. 065-85 37-a 128-84 065-85 Gentlemen : This refers to your letter dated November 7, 1984 requesting a ruling confirming that royalties derived by your client, Polygram Corporation from the use of motion picture films or films or tapes for radio or television broadcasting are subject to a tax of 10% of such royalties pursuant to Article 13 par. (b) (iii) of the RP-US Tax Treaty. It is represented that Polygram Corporation is a non-resident foreign corporation organized and existing under and by virtue of the laws of the State of Delaware, USA; that it is engaged in the business of film distribution and has entered into license contracts with local television stations and advertising agencies for the telecast of certain films; that its contracts grant to local licensees the right to telecast films specified therein in consideration for the payment of royalties or rentals to Polygram Corporation. In reply, please be informed that the most-favored-nation clause provided for under subparagraph (iii) of Article 13 (royalties) in the RP-US tax treaty in relation to the RP-Sweden tax treaty (Art. VIII, (1)) and RP-Denmark tax treaty (Art. IX, (1)) is applicable in this case. Considering that under both tax treaties, Swedish and Danish residents are subject to 10% tax on film royalties or film rentals paid as a consideration for the use, or the right to use, motion picture films, or films or tapes for radio or television broadcasting, the same reduced rate is also extended to American residents. This office hereby confirms that the royalties derived by Polygram Corporation for the use of motion picture films or films or tapes for radio or television broadcasting are subject to 10% withholding tax, pursuant to Art. 13(2)(iii) of the RP-US Tax Treaty. aisadc Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner