BIR Ruling No. 139-96

December 12, 1996 BIR RULING NO. 139-96 25 (b) (6) 000-00 139-96 Korea Exchange Bank 33/F Citibank Tower 8741 Paseo de Roxas St., Makati City Attention: Mr . Don Young Lee General Manager Gentlemen : This refers to your letter dated December 4, 1995 requesting in effect, for a ruling that interest income to be received by the Korea Exchange Bank from a loan extended to residents of the Philippines is exempt from Philippine income tax and consequently from the withholding tax under Article 11 (4) (ii) (b) of the RP-Korea Tax Treaty. It is represented that the Korea Exchange Bank is a financial institution which is 100% owned by the Government of Korea; that it has opened full service branch in the Philippines on July 1, 1995. In reply, please be informed that pursuant to Article 11 (4) (ii) (bb) of the RP-Korea Tax Treaty which provides that: "Article 11 "(1) . . . "(2) . . . "(3) . . . "(4) Notwithstanding the provisions of paragraph 2 hereof, interest arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in that other State if the interest is paid in respect of (i) . . . (ii) a loan made, guaranteed or insured, or a credit extended, guaranteed or insured by (aa) . . . (bb) in the case of Korea, the Bank of Korea, the Export-Import Bank of Korea, the Korea Exchange Bank and (cc) . . . Such being the case, interest income arising in the Philippines and paid in respect of a loan made, guaranteed or insured, or a credit extended, guaranteed or insured by the Korea Exchange Bank shall not be subject to Philippine income tax and consequently to the withholding tax imposed under Section 25 (b) (A) and Section 50 (a) of the Tax Code, as amended. aisadc Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue