BIR Ruling No. 207-82

June 28, 1982 BIR RULING NO. 207-82 037-a 046-80 207-82 Jardine Davies Inc. Jardine Davies Bldg. P. O. Box 561 MCC Makati, Metro Manila Attention: Mr . J . P . Lukban Senior Vice President Gentlemen : This refers to your letter dated September 28, 1981 requesting certification to the effect that royalty payments made by Marinduque Mining and Industrial Corporation (MMIC), a domestic corporation, in favor of Blue Circle Industries Ltd. (BCI), a non-resident foreign corporation registered under the laws of the United Kingdom, are subject to 15% withholding tax. cdt It is represented that MMIC is a BOI registered enterprise engaged in preferred area of activity; that MMIC is liable to pay royalties to BCI in consideration of the information, researches, and services rendered to MMIC under the BOI registered Technical Agreement; and that the royalties being remitted by MMIC to BCI are being subjected to 35% withholding tax. In reply thereto, I have the honor to inform you that Article 11 of the RP-UK Tax Treaty provides; viz: "Article 11 Royalties "(1) Royalties arising in a Contracting State which are derived and beneficially owned by a resident of the other Contracting State may be taxed in that other State. "(2) Such royalties may also be taxed in the contracting state in which they arise, and according to the law of that state. However, the tax so charged shall not exceed: (a) 15 per cent of the gross amount of the royalties, where the royalties are paid: (i) by an enterprise registered with the Philippine Board of Investments and engaged in preferred areas of activity or (ii) in respect of cinematograph films and films or tapes for television or radio broadcasting; (b) in all other cases, 25 per cent of the gross amount of the royalties. "(3) The term "royalties" as used in this Article means payment of any kind received as a consideration for . . . information concerning industrial, commercial or scientific experience ." (Emphasis ours) Moreover, under Section 37(a)(4) of the Tax Code, among those considered royalties are payments for "the supply of scientific, technical, industrial or commercial knowledge or information" or for "the supply of any assistance that is ancillary and subsidiary to, and, is furnished as a means of enabling the application or enjoyment of" said knowledge or information. cdtech In view thereof, the royalties paid by MMIC to BCI are subject to the 15% withholding tax pursuant to Article 11, Section 2(a)(i) of the RP-UK Tax Treaty. Very truly yours, RUBEN B. ANCHETA Acting Commissioner