BIR Ruling No. 234-83

December 19, 1983 BIR RULING NO. 234-83 Gentlemen : This refers to your letter dated September 15, 1983 requesting confirmation of your opinion to the effect that interest payments to be made by the Landoil Resources Corporation of the Philippines (Landoil) to Kuwait Foreign Trading Contracting and Investment Co. (S.A.K.) (KFTCIC) is exempt from income tax. cd It is represented that on various dates Landoil secured certain credit facilities from KFTCIC as follows: (1) US$1.0 million, as part of the US$26.0 million revolving loan under the Loan Agreement dated November 24, 1980, among Landoil, CSFB AG of Athens, Greece several banks and financing institutions, and Credit Suisse First Boston Limited; and (2) US$4.0 million, as part of the US$20.0 million syndicated guarantee facility under the agreement dated July 9, 1981 among Landoil, several banks and financial institutions and Al Bahrain Arab African Bank ((E.C.): that the abovementioned credit facilities from KFTCIC were direct loans to Landoil and were not coursed through a Foreign Currency Deposit Unit (FCDU) of any financial institution; and that KFTCIC is 94.74% owned and controlled by the Kuwait Government. In reply thereto, I have the honor to inform you that income received by foreign governments, financing institutions owned, controlled or enjoying refinancing by foreign governments, and international or regional financing institutions established by governments, from their investments in the Philippines in loans, stocks, bonds or other domestic securities, or from interest on their deposits in banks in the Philippines is exempt from income tax pursuant to Section 29(c)(8)(A)(1), (2) and (3) of the Tax Code, as amended. Such being the case, and inasmuch as the Kuwait Foreign Trading Contracting and Investment Co. (S.A.K.) (KFTCIC) is 94.74% owned and controlled by the Kuwait government, this Office is of the opinion as it hereby holds that interest payments to be remitted by Landoil to KFTCIC are not subject to the withholding tax provisions of Section 53(e)(2) in relation to Section 54 of the Tax Code. cdt Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner Bureau of Internal Revenue