15% Withholding Tax — Royalties

June 30, 1980 BIR RULING NO. 087-80 Vacu-Lug Philippines, Inc. Commercial Center, P.O. Box 896 Makati, Metro Manila Attention: Mr . Renato M . Sioson Controller Gentlemen : This refers to your letter dated March 22, 1979 requesting a ruling as to whether or not the royalties which will be remitted by Vacu-Lug Philippines, Inc. to Vacu-Lug Traction Tyres (Overseas) Ltd. Gonerby Hill Foot, Grantham, Lincoln, England under a licensing agreement entered into by and between the former and the latter shall be subject to 15% and/or 25% withholding tax. It is represented that Vacu-Lug Philippines, Inc. is engaged in the business of relugging and repair of worn-out tires in the Philippines under a licensing agreement with Vacu-Lug Traction Tyres (Overseas) Ltd., England and that under the Convention between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of the Philippines for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains dated June 10, 1976, royalties shall be subject to a 15% and/or 25% withholding tax. In reply thereto, I have the honor to inform you that pursuant to Article II of the Convention between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of the Philippines for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains dated June 10, 1976, the tax on royalties shall not exceed 15% of the gross amount of the royalties where the royalties are paid by an enterprise registered with the Philippine Board of Investments and engaged in preferred areas of activity and in all other cases, 25% of the gross amount of the royalties. Such being the case, and inasmuch as Vacu-Lug Philippines, Inc. is registered with the Board of Investments as a service exporter in the fields of relugging and repair of worn-out truck, Earthmover, Log Skidder, and Industrial Pneumatic and Solid Tires and Tire Management and Technology, the royalties which it will remit to Vacu-Lug Traction Tyres (Overseas) Ltd., England is subject only to the 15% withholding tax. Very truly yours, RUBEN B. ANCHETA Acting Commissioner