Interest on Reinsurance Premiums Held by a Domestic Corporation which is Due to a Foreign Corporation is Subject to 15% Withholding Tax

December 8, 1981 BIR RULING NO. 261-81 24-b 000-00 261-81 Commonwealth Insurance Company Warner Barnes Bldg. 2900 Faraday St. corner South Expressway, Paraaque Attention: Mr . Juan C . Billanog Accounting Manager Insurance Division Gentlemen : This refers to your letter dated June 26, 1980 requesting a ruling to the effect that the interest on reinsurance premium held by you which is due to Societe Anonyme Francaise de Reassurances , your reinsurer, a foreign corporation domiciled in France is subject to 15% withholding tax. In reply thereto, I have the honor to inform you that Article II (1) and (2) of the Convention between the Government of the Republic of the Philippines and the Government of the French Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income provides, viz: "Article II Interest "1. Interest arising in the Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. "2. However, such interest may be taxed in the Contracting State in which it arises, and according to the law of that State, but if the recipient is the beneficial owner of the interest the tax so charged shall not exceed 15 per cent of the amount of the interest." Under paragraph 2 above-quoted, the interest on the reinsurance premiums held by you which is due to Societe Anonyme Francaise de Reassurances is subject to 15% withholding tax. Very truly yours, RUBEN B. ANCHETA Acting Commissioner