Exemption from Withholding Tax on Management Fees

April 8, 1987 BIR RULING NO. 103-87 24 103-87 Gentlemen : This refers to your letters dated February 6 and 11, 1987 stating that you are a wholly-owned subsidiary of Coopers Animal Health Ltd., a corporation organized and existing under the laws of the United Kingdom; that your company in the Philippines is under the administrative management control of your Regional Office (Asia) in Kuala Lumpur, Malaysia; that said regional office renders administrative and management assistance to you in accordance with the Management Agreement executed by you with Coopers Animal Health Ltd. in March 1986; that you were billed for such manhours of assistance in the total amount of M$27,024.00 Malaysian dollars for the period September to November 1985; and that on December 22, 1986, the Professional Regulation Commission informed your company in connection with your request for approval/registration of your aforementioned Management Agreement with the Central Bank of the Philippines, that the technical expertise which your office need is available locally; as such the Commission is not inclined to recommend approval/registration of the said Management Agreement. adc In this connection, you now posed the following queries: "(1) Are there any legal impediments in paying the amount of M$27,024.00? "(2) Can this be remitted in the acceptable foreign currency? "(3) Will there be any withholding tax? How much? Please bear in mind that the payees are non-resident aliens. "(4) Does the billing have to come in a more official format such as an invoice? In reply thereto, I have the honor to inform you that considering that the approval/registration of the aforementioned Management Agreement has not been favorably recommended by the Professional Regulation Commission and consequently has not been approved/registered with the Central Bank of the Philippines, no remittance of the alleged management fees can be made by your company to Coopers Animal Health Ltd., Malaysia. Consequently, you are not liable for the payment of any withholding tax on said management fees. Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner