Request for Retroactive Application of BIR Ruling UN 135-94 dated April 11, 1994 Involving Time Life International Phils., Inc.

September 24, 1998 BIR RULING NO. 136-98 28 (b) (6)-246-000-00-136-98 Sycip, Gorres Velayo & Co. 6760 Ayala Avenue Makati City Attention: Atty . F . G . Tagao Tax Division Gentlemen : This refers to your letter dated November 11, 1994 requesting in behalf of your client, Time Life International (Phils.), Inc., (TLIP), confirmation of your opinion that BIR Ruling No. UN-135-94 dated April 11, 1994 addressed to Time-Life International (Phils.), Inc., 30 Juan Luna Street corner San Lorenzo Drive, San Lorenzo Village, Makati City to the effect that: "Under the aforequoted provisions of the RP-US Tax Treaty, TII does not have a permanent establishment in the Philippines. Accordingly, the business profits derived by it in the nature of subscription payments by Philippine subscribers to the Time Magazine, a TII publication are not subject to Philippine income tax and consequently to the withholding tax under Section 25(b)(1) in relation to Section 50(a) of the Tax Code, as amended. (BIR Ruling No. 426-93 dated October 29, 1993). prLL "This supersedes BIR Ruling No. 25(b)(1)-000-00-099-90 dated May 28, 1990." can be made to apply retroactively for the following reasons: 1) BIR Ruling No. 099-90 dated May 28, 1990 to the effect that "The subscription payments for the Time Magazine by Philippine subscribers are considered Philippine source income; hence, subject to Philippine income tax, and consequently to the 35% withholding tax prescribed by Section 25(b)(1) of the Tax Code in relation to Sections 50 (a) and 51 of the same Code." was superseded by BIR Ruling No. UN 135-94 dated April 11, 1994 citing BIR Ruling No. 426-93 dated October 29, 1993, by considering the application of the provisions of the RP-US Tax Treaty which has already been ratified and in fact effective as of January 1, 1983. 2. With the revocation of BIR Ruling No. 99-90 by BIR Ruling No. 135-94 citing BIR Ruling No. 426-93, the previous ruling, effectively, is considered as not having taken effect at all because the effect of a revocation is to render a previous ruling nugatory or non-existent. 3. In BIR Ruling No. 99-90 revoking BIR Ruling No. 18-80, the income recipient is Time, Inc. whereas in BIR UN 135-94, the income recipient is Time International, Inc. In other words, different persons are involved and therefore, it is as if no previous ruling was ever issued to Time International, Inc. In reply thereto, please be informed that in view of the foregoing considerations, your request that BIR Ruling UN 135-94 dated April 11, 1994 be given retroactive application is hereby granted. 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 as null and void. Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue