BIR Ruling No. 110-83

June 20, 1983 BIR RULING NO. 110-83 Gentlemen : This refers to your letter dated June 1, 1983 requesting a ruling in the tax aspect of the transaction entered into by Caltex (Philippines) Inc. (CPI) described as follows: cdtech "1. For CPI to purchase from the Mobil Petroleum Company, Inc. (MOPET), USA, the entire issued and outstanding common shares of Mobil Oil Phils., Inc. (MOPI) corresponding only to the fixed assets of MOPI, for a total consideration of US$40.0 million; "2. For CPI accept additional foreign equity investments in the aggregate amount of US$40.0 million, for USA; and "3. For CITL to constructively inward-remit the proceeds of said additional US$40.0 million foreign equity investments to cover payment for the acquisition of CPI of the entire issued and outstanding common shares of MOPI held by MOPET." You also stated that the proposed purchase price of the fixed assets of US$40.0 million (approximately P402.32 million) is very much higher than their book value as of December 31, 1982 (P125.889 million) or a difference of P278.431 million. In reply, please be informed that from the foregoing transaction, there is constructive inward remittance of the US$40.0 million to be utilized by CPI in paying MOPET the purchase price of the latter's MOPI shares. Such being the case, MOPET, a foreign corporation not engaged in trade or business in the Philippines will derive income from Philippine source subject to income tax. Under Sections 53 and 54 of the same Code, every corporation having control, receipt, custody, disposal or payment of fixed or determinable annual, periodical or casual gains, profits and income and capital gains of a foreign corporation not engaged in trade or business in the Philippines shall deduct and withhold the tax thereon and remit the same to this Bureau. Since, CPI has the control, receipt, custody and disposal of the income to be derived by MOPET from the transaction, it is liable for the payment of the withholding tax on such income. Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner Bureau of Internal Revenue