Request for Renewal of Authority Relative to the Availment of Preferential Tax Treaty Rate of 10% on Royalties Paid to Philips Electronics, B.V., a Resident of Eindhoven, Netherlands, pursuant to the RP-Netherlands Tax Treaty

July 12, 1996 BIR RULING NO. 077-96 28 (b) (6) 000-00 77-96 Philips Semiconductors (Phils.), Inc. Real Street, Pamplona Las Pias, Metro Manila Attention: Mr . Amelito P . Lopes Vice-President & Financial Controller Gentlemen : This refers to your letter dated April 2, 1995 requesting for the renewal of the authority previously granted by this Office relative to the availment of the preferential tax treaty rate of 10% on royalties paid to Philips Electronics, B.V., a resident of Eindhoven, Netherlands, pursuant to the provisions of Article 12, paragraphs 2 and 4 of the RP-Netherlands Tax Treaty. LLpr Documents submitted show that your are a corporation organized and existing under the laws of the Philippines and registered with the Board of Investments as a preferred pioneer enterprise with Certificate of Registration No. EP-94-404 dated December 16, 1993; that on February 1, 1991, you entered into an Industrial Cooperation Agreement with Philips Electronics, B.V. whereby you are to manufacture and sell semiconductor devices, accessories and components and use the right and license in connection with the manufacture and sale of said products; that Philips Electronics, B.V. shall furnish the necessary technical information, materials, services and licenses; that the said Agreement which expired on January 31, 1996 was renewed on February 1, 1996 by and between Philips Semiconductors (Phils.), Inc. and Philips Electronics N.V. of Netherlands under Certificate of Registration No. 1799 issued on March 11, 1997 by the Bureau of Patents, Trademarks and Technology Transfer; that the said renewed Industrial Cooperation agreement shall be valid for five (5) years form February 1, 1996 up to February 1, 2001; that you shall pay Philips Electronics, NV, a service charge of three (3%) percent on your "net turnover of the Products assembled and/or manufactured, used, sold or otherwise disposed of by the Company" In reply, please be informed that pursuant to Article 12, paragraphs 2 and 4 of the RP-Netherlands Tax Treaty reading: Article 12 xxx xxx xxx "2. However, such royalties may also be taxed in the State in which they arise and according to the laws of that State, but if the recipient is the beneficial owner of the royalties the tax so charged shall not exceed : (a) 10 percent of the gross amount of the royalties where the royalties are paid by an enterprise registered. and engaged in preferred areas of activities in that State; (Emphasis ours) xxx xxx xxx "4. The term "royalties" as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, . . . any patent, trademark, design or model, plan, secret formula or process, or for the use of, or the right to use industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience." the royalty income of residents of Netherlands derived from the Philippines is subject to the preferential tax rate of 10%. Such being the case, your request for the renewal of your previous authority to avail of the preferential tax treaty rate of 10% on the royalty under consideration is hereby granted. The said tax should be withheld by you before actual remittance to Philips Electronics, N.V. of Netherlands. prLL This confirmation and approval shall be valid for a period of five (5) years from February 1, 1996 up to February 1, 2001 unless otherwise earlier revoked. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue