Royalties Paid for the Use of Processes and Know-How Subject to Withholding Tax Not to Exceed 25% under RP-Japan Tax Treaty

June 11, 1981 BIR RULING NO. 096-81 37-a-4 000-00 096-81 Union Chemicals, Inc. Eulogio Rodriguez Avenue Barrio Ugong, Pasig Metro Manila Attention: Mr . Dionisio de Guzman Accounting Manager Gentlemen : This refers to your letter dated March 20, 1981 requesting a ruling to the effect that the royalties which will be remitted by Union Chemicals, Inc. (UCI) to Ajinomoto Co., Inc., Tokyo, Japan, under a Technological Assistance Agreement executed by them is subject to 25% withholding tax. It is represented that on November 25, 1978 Ajinomoto Co., Inc. and UCI entered into a Renewal of Technological Assistance Agreement whereby Ajinomoto granted UCI the exclusive and non-transferable right to use Ajinomoto's processes and know-how in the manufacture of monosodium glutamate, its by-products and other related products and to use on or in connection with the products certain Ajinomoto's trademarks; and that under the RP-Japan Tax Treaty, royalties shall be subject to a 15% and/or 25% withholding tax. cdta In reply thereto, I have the honor to inform you that pursuant to Article 12 of the RP-Japan Tax Treaty, the tax on royalties shall not exceed 15% of the gross amount of the royalties if the royalties are paid in respect of the use of or the right to use cinematograph films and films or tapes for radio or television broadcasting and in all other cases, 25% of the gross amount of the royalties. Such being the case, and inasmuch as the royalties are paid in respect of the use of Ajinomoto's processes and know-how in the manufacture of monosodium glutamate, the royalties which UCI will remit to Ajinomoto Co., Inc., Tokyo, Japan is subject to 25% withholding tax. Very truly yours, RUBEN B. ANCHETA Acting Commissioner