BIR Ruling No. 143-84

September 3, 1984 BIR RULING NO. 143-84 37-a-09-84-143-84 Gentlemen : This refers to your letter dated July 17, 1984 requesting for a certification and/or ruling on the applicable withholding tax rate on royalties which your company Nobel Philippines, Inc. (NPI) will remit to Atlas Powder Co. (ATLAS POWDER) and Nitro Nobel AB (NNAB). It is represented that your company, NPI, is a domestic company duly registered with the Board of Investments as a preferred-pioneer enterprise; that it entered into a License and Technical Agreement with NNAB, whereby NNAB shall supply NPI with technical know-how in the manufacturing of industrial explosive and in consideration thereof, NPI shall pay royalty equivalent to 3% of the net sale value of the explosives manufactured and sold, 2-1/2% of which shall go to ATLAS POWDER, a United States company, the beneficial owner of that portion of the royalties and 1/2% to NNAB, a Swedish company. In reply, please be informed that Article 13(2)(b)(ii) of the RP-US Tax Treaty provides for a 15% tax on the gross amount of the royalties where the royalties are paid by a corporation registered with the Philippine Board of Investment engaged in preferred areas of activities. Therefore, the applicable withholding tax rate on royalty payments which NPI will remit to ATLAS POWDER is 15% of the gross amount of the royalties with respect to its 2-% royalty share. With respect to the % share of NNAB, considering that the RP-Sweden Tax Treaty does not contain a provision on royalties of the type described above, the same shall be subject to 35% withholding tax pursuant to Section 24(b)(1) of the National Internal Revenue Code. iatdc Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner