Request for Approval of Application for Tax Treaty Relief on Income Payments Made by Cash and Carry Makro Philippines, Inc. (Cash and Carry) to L. V. Salamanca Ingenieros S.A. (LV Salamanca)

May 16, 1997 BIR RULING NO. 066-97 28 (b) (6) 000-00 066-97 Joaquin Cunanan & Co. 8th Floor, BA Lepanto Bldg. Paseo de Roxas Makati City Attention: Ms . Tomasa H . Lipana Partner Gentlemen : This refers to your letter dated October 4, 1995 requesting for approval of the application for tax treaty relief on income payments made by Cash and Carry Makro Philippines, Inc. (Cash and Carry) to L. V. Salamanca Ingenieros S.A. (LV Salamanca). It is represented that LV Salamanca is a corporation organized and existing under the laws of Spain and that it has no permanent establishment in the Philippines; that pursuant to a Service Agreement between LV Salamanca and Cash and Carry, a domestic corporation duly registered with the Securities and Exchange Commission (SEC), the former shall render service to assist in remodeling the existing warehouse of the latter in the Philippines for a fee equivalent to Five Hundred Twenty Five Thousand U.S. Dollars (US$525,000.00); that LV Salamanca has no branch, office or any place of management in the Philippines; and that under the agreement, it is given four months within which to execute and complete the undertaking. In reply, please be informed that since LV Salamanca has no permanent establishment in the Philippines, said income payment arising from the Service Agreement between LV Salamanca and Cash and Carry is not subject to Philippine income tax, pursuant to Article 7 (1) of the RP-Spain Tax Treaty, stating "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." Moreover, it is not likewise subject to withholding tax imposed under Revenue Regulations No. 6-85, as amended by Revenue Regulations No. 12-94. This ruling is issued on the basis of the foregoing representations. However, if upon investigation, it will be disclosed that the facts are different from that as represented, then this ruling shall be considered null and void. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue