Request for Renewal of Authority Relative to Availment of Preferential Tax Treaty Rate on Royalties Paid to Mitsubishi Motors Corporation of Japan

November 27, 1996 BIR RULING NO. 134-96 28 (b) (1) 000-00 134-96 Asian Transmission Corporation P.O. Box 1658, Makati Central Post Office Makati City, Metro Manila Attention: Ms . Luz G . Banaybanay Dept . Manager Accounting Gentlemen : This refers to your letter dated February 16, 1996 requesting for the renewal of the authority previously granted by this Office relative to the availment of the preferential tax treaty rate on royalties paid to Mitsubishi Motors Corporation of Japan, pursuant to Article 12, paragraphs (3) and (4) of the RP-Japan Tax Treaty. cdtech Documents submitted show that you are a corporation organized and existing under the laws of the Philippines and registered with the Board of Investments on a preferred pioneer status under Certificate of Registration No. 85-893 dated March 19, 1985; that on March 4, 1991 you entered into a Manufacturing Patent License and Technical Assistance Agreement with Mitsubishi Motors Corporation, a resident of Japan, covered by Certificate of Registration No. 1186 dated March 13, 1991 issued by the Bureau of Patents Trademarks and Technology Transfer; that prior to the expiration of said Agreement, the same was renewed on August 28, 1995 under Certificate of Registration No. 1766 which is valid for a period of five (5) years from January 3, 1995 to January 2, 2000; and that you shall pay Mitsubishi Motors Corporation of five percent (5%) of net sales price for transmission/omissions and another four percent (4%) of net sales price for rear wheel drive vehicle. In reply, please be informed that pursuant to Article 12, paragraphs (3) and (4) of the RP-Japan Tax Treaty reading: Article 12 "(3) Notwithstanding the provisions of paragraph (2), the amount of tax imposed by the Philippines on the royalties paid by a company, being a resident of the Philippines, registered with the Board of Investments and engaged in preferred pioneer areas of investment under the investment incentives laws of the Philippines to a resident of Japan, who is the beneficial owner of the royalties, shall not exceed 10 percent of the gross amount of the royalties . (Underscoring ours) "(4) The term "royalties" as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, . . . , any patent, trademark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience." the royalty income of residents of Japan derived from the Philippines shall be subject to a reduced rate of 10%. Such being the case, you request for the renewal of your previous authority to avail the preferential tax treaty rate of 10% on the royalty under consideration is hereby granted. The said tax should be withheld by you before actual remittance to Mitsubishi Motors Corporation of Japan. LLphil This confirmation and approval shall be valid for a period of five (5) years from January 3, 1996 up to January 2, 2000 unless otherwise earlier revoked. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue