ITAD BIR Ruling No. 035-13

February 25, 2013 ITAD BIR RULING NO. 035-13 SGV & Co. 6760 Ayala Avenue 1226 Makati City Attention: Ma. Victoria A. Villaluz Authorized Representative Gentlemen : This refers to your Tax Treaty Relief Application ("TTRA") filed on August 24, 2011, on behalf of Sky Cable Corporation ("Sky Cable") , requesting confirmation that the license fees made by Sky Cable to AXN Holdings LLC ("AXN") under the Term Sheet Agreement between them ( "Agreements" ) are subject to 15 percent preferential tax rate pursuant to Article 13 (2) (b) (iii) of the Philippines-United States tax treaty in relation to the Philippines-China tax treaty . IScaAE It is represented that Sky Cable and AXN entered into three (3) Agreements with details as follows: 1. Sky Cable Corporation Amended and Restated Term Sheet for the Animax Channel ( Term of the contract: beginning May 1, 2008 ending April 30, 2011 ) 2. Sky Cable Corporation Amended and Restated Term Sheet for the AXN Channel ( Term of the contract: beginning May 1, 2008 ending April 30, 2011 ) 3. Central CATV, Inc. Term Sheet for the AXN Beyond Channel ( Term of the contract: beginning January 1, 2008 ending December 31, 2010 ) Relative thereto, please be informed that Section 14 of Revenue Memorandum Order ("RMO") No. 72-2010 , published in the Manila Bulletin on October 20, 2010, and effective November 4, 2010, provides that: " SEC. 14. When and Where to File the TTRA. All tax treaty relief applications (updated BIR Forms No. 0901-D, 0901-I, 0901-R, 0901-P, 0901-S, 0901-T, 0901-O and 0901-C) relative to the implementation and interpretation of the provisions of Philippine tax treaties shall only be submitted to and received by the International Tax Affairs Division (ITAD). If the forms of any necessary documents are submitted to any other BIR office, the application shall be considered as improperly filed. Filing should always be made BEFORE the transaction. Transaction for purposes of filing the TTRA shall mean before the occurrence of the first taxable event . Failure to properly file the TTRA with ITAD within the period prescribed herein shall have the effect of disqualifying the TTRA under this RMO . " (Emphasis Supplied) In view thereof, since the TTRA was filed only on August 24, 2011 , after the date of effectivity of the Agreements which respectively ended on December 31, 2010 and April 30, 2011 , this Office hereby DENIES relief on all payments under the Agreements in violation of the requirement under RMO 72-2010 that filing of the TTRA should be made BEFORE the transaction, that is the payment of services. Accordingly, said payments shall be subject to tax at the rate of 30 percent as provided in Section 28 of the above-cited Tax Code of 1997, as amended, to wit: "SEC. 28. Rates of Income Tax on Foreign Corporations . . . . (B) Tax on Nonresident Foreign Corporation . (1) In General. Except as otherwise provided in this Code, a foreign corporation not engaged in trade or business in the Philippines shall pay a tax equal to thirty-five percent (35%) of the gross income received during each taxable year from all sources within the Philippines, such as interests, dividends, rents, royalties, salaries, premiums (except reinsurance premiums), annuities, emoluments or other fixed or determinable annual, periodic or casual gains, profits and income, and capital gains, except capital gains subject to tax under subparagraph 5(c) and (d) above: * Provided, That effective January 1, 2009, the rate of income tax shall be thirty percent (30%)." Please be guided accordingly. llcd Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue