Request for Relief from Double Taxation on Proposed Annual Remittances of Royalties and Service Fees to Comweld Group Pty. Ltd. of Australia (CIGWELD) in Accordance with the Provisions of the RP-Australia Tax Treaty

June 15, 1995 BIR RULING NO. 090-95 28 (b) (6) 000-00 090-95 Sycip Gorres Velayo & Co. Philamlife Building Jones Avenue, Cebu City Attention: Mr . Carlos V . Jaurigue Tax Division Gentlemen : This refers to your letter dated February 18, 1994 requesting in behalf of your client, Philippine Welding Equipment, Inc. (PWE), a relief from double taxation on its proposed annual remittances of royalties and service fees to Comweld Group Pty. Ltd. of Australia (CIGWELD) in accordance with the provisions of the RP-Australia Tax Treaty. LibLex It is represented that PWE is a domestic corporation organized and existing under the laws of the Philippines, with principal office at Jagobiao, Mandaue City, Cebu; that CIGWELD is a non-resident foreign corporation organized and existing under the laws of the State of Victoria, Australia with principal office located at 85 Chifley Drive, Preston, Victoria, Australia; that PWE is a manufacturer and distributor of gas equipment, welding equipment and allied products; that to increase its existing product line, PWE engaged CIGWELD to provide technical and engineering services in the design, development and production of certain gas equipment, welding equipment and allied products for period of five (5) years starting October 1993 for a consideration of A$120,000 per annum; and that CIGWELD has no permanent establishment in the Philippines. In reply, please be informed that under Article 12(1)(2)(b) of the RP-Australia Tax Treaty, pertinent portions of which read thus "1. Royalties arising in one of the Contracting State, being royalties to which a resident of the other Contracting State in beneficially entitled may be taxed in that other state. "2. Such royalties may also be taxed in the Contracting State in which they arise, and according to the law of that State. However, the tax no charged shall net exceed. xxx xxx xxx (b) in all other cases, 25 percent of the gross amount of royalties." the payments by PWE to CIGWELD amounting to A$120,000 per annum shall be subject to Philippine income/withholding tax at the preferential rate of 25% of the gross amount thereof. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. cdll Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue