Request for Availment of the Lower Preferential Rate to be Applied for Future Remittances

September 19, 1994 BIR RULING NO. 138-94 25 000-00 138-94 Pilipinas Hino Incorporated E. de los Santos Ave. corner Madison St. Mandaluyong City Attention: Mr . Felipe S . Barroga AVP Controller Gentlemen : This refers to your letter dated June 13, 1994 stating that Pilipinas Hino Incorporated (PHI) is a corporation engaged in the assembly and distribution of Hino trucks and buses, Suzuki utility vehicles and spare parts which it imports directly from Marubeni Corporation, a non-resident Japanese corporation; that the latter granted PHI a credit term of 160 days, within which to pay the FOB cost of the importations, however, PHI is charged interests based on the Japanese short-term prime rate; that the interest is remitted to Marubeni Corporation in Japan less the corresponding 20% withholding tax pursuant to the provision of Section 25 of the Tax Code; and that according to the stipulations of Article 11, Section 2(b) of RP-Japan Tax Treaty, the amount of withholding tax rate could be reduced from 20% to 15%. cdtech Based on the foregoing, you now request for an availment of the lower preferential rate to be applied for your future remittances. In reply, please be informed that pertinent portion of Article 11, Section 2(b) of the RP-Japan Tax Treaty reads thus xxx xxx xxx (2) However, such interest may also be taxed in the Contracting State in which it arises, and according to the laws of that Contracting State, but if the recipient is the beneficial owner of the interest, the tax so charged shall not exceed: xxx xxx xxx (b) 15 per cent of the gross amount of the interest in all other cases. xxx xxx xxx Accordingly, this Office is of the opinion as it hereby holds, that you can avail of the reduced withholding tax rate 15 per cent of the gross interest in assurance with the aforecited provision of the RP-Japan Tax Treaty. 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 null and void. cdta Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue