BIR Ruling No. 495-12

July 31, 2012 BIR RULING NO. 495-12 Sec. 32 (B) (7) (a); 103-12 Manabat Sanagustin & Co., CPAs The KPMG Center, 9/F 6787 Ayala Avenue Makati City Attention: Atty. Herminigildo G. Murakami Principal, Tax & Corporate Services Gentlemen : This refers to your letter dated May 31, 2012 stating that your client, KUWAIT INVESTMENT AUTHORITY (KIA), is an autonomous government body responsible for the management and administration of Kuwait's General Reserve Fund (GRF), Future Generations Fund (FGF), as well as any other funds entrusted to it by Kuwait's Minister of Finance for and on behalf of the State of Kuwait; that KIA (formerly known as the Public Investment Authority) was established by virtue of Kuwait Law No. 47/1982 issued on June 13, 1982; that KIA manages the funds as a global investor, with investments in all main geographical areas and asset classes, managed by portfolio managers on an active basis; that it is a long term investor and the in-house investment management team covers equities, fixed income, treasury, private equity and property; and that in the Philippines, KIA has investments in government bonds, corporate bonds and bank deposits which are primarily held by its custodian, the Hong Kong and Shanghai Bank Corp. (HSBC). Based on the foregoing representations, you now request confirmation of your opinion that the income derived by KIA from investments in the Philippines in loans, stocks, bonds or other domestic securities are not subject to Philippine income tax and consequently to Philippine withholding tax pursuant to Section 32 (B) (7) (a) of the Tax Code of 1997, as amended. In reply thereto, please be informed that Section 32 (B) (7) (a) (i) of the Tax Code of 1997 provides that "(B) Exclusions from Gross Income The following items shall not be included in gross income and shall be exempt from taxation under this Title: xxx xxx xxx (7) Miscellaneous Items. SHECcT (a) Income Derived by Foreign Government. Income derived from investments in the Philippines in loans, stocks, bonds or other domestic securities, or from interest on deposits in banks in the Philippines by (i) foreign governments, (ii) financing institutions owned, controlled, or enjoying refinancing from foreign governments, and (iii) international or regional financial institutions established by foreign governments." From the foregoing, it is clear that the income derived by a foreign government from investments in the Philippines is exempt from income tax. Accordingly, any income to be derived by KIA from its investments in the Philippines in loans, stocks, bonds, or other domestic securities, or from interest on deposits is EXEMPT from income tax and consequently from withholding tax. (BIR Ruling No. 103-12 dated February 21, 2012) This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue