BIR Ruling [UN-338-95]

September 18, 1995 BIR RULING [UN-338-95] Pilipinas Transport Industries, Inc. E. de los Santos Avenue cor. Madison Street Mandaluyong City Attention: Mr . Koichi Takaya VP Treasurer Gentlemen : This refers to your letter dated November 18, 1994 stating that Pilipinas Transport Industries, Inc. (PTII) is a domestic corporation engaged in the distribution of Suzuki spares parts which it imports directly from Marubeni Corporation (MC), a non-resident Japanese corporation; that MC granted PTII a credit term of 180 days within which to pay the FOB cost of the importations; that however, PTII is charged interests based on the Japanese short term prime rate; that the interest is remitted to MC, Japan minus the corresponding 20% withholding tax pursuant to the provision of Section 25 of the Tax Code, as amended; and that according to the stipulations of Article 11, Section 2(b) of RP-Japan Tax Treaty, the amount of Withholding tax rate could be reduced from 20% to 15%. cd Based on the foregoing, you now request for an availment of the lower preferential tax rate to be applied for your future remittances. In reply, please be informed that pursuant to Article 11, Section 2 (b) of the RP-Japan Tax treaty, pertinent portion of which reads thus "xxx xxx xxx. "(2) However, such interest may also be taxed in the Contracting State in which it arises, and according to the laws of that Contracting State, but if the recipient is the beneficial owner of the interest, the tax so charged shall not exceed: "xxx xxx xxx "(b) 15 per cent of the gross amount of the interest in all other cases. "xxx xxx xxx" you can avail of the reduced withholding tax rate of 15 per cent of the gross interest in accordance with the aforequoted provision of the RP-Japan Tax Treaty. (BIR Ruling No. 25/000-00/138-94 dated September 10, 1994) This ruling is being issued on the basis of the foregoing representations. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. cdll Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service)