ITAD BIR Ruling No. 072-10

December 7, 2010 ITAD BIR RULING NO. 072-10 Revenue Bulletin No. 1-2003 Sycip Gorres Velayo & Co. 6760 Ayala Avenue 1226 Makati City Attention: Veronica A. Santos Tax Division Gentlemen : This refers to your Tax Treaty Relief Application (TTRA) filed on October 18, 2010, on behalf of your client, Collective Brands International Franchising, LLC ("Collective Brands") , requesting confirmation of your opinion that the withholding tax on royalties paid to it by Footwear Specialty Retailers, Inc. ("FSRI") are subject to the preferential tax rate of 10 percent pursuant to the Philippines-United States tax treaty in relation to the Philippines-China tax treaty. It is represented per Part IV (Details of Transaction) of BIR Form No. 0901-R, that as to the following: a.) Terms, b.) Consideration, and c.) Date of Payment the response was "Not Applicable" , while as to the Date of Transaction, it was indicated that there was "None yet". In reply, please be informed that Section 2 (t) of Revenue Bulletin 1-2003 dated July 14, 2003, provides as follows: " Section 2. List of No-ruling Areas . The following shall be construed and identified as 'No-ruling Areas': xxx xxx xxx t) Request for rulings on issue/s or transactions based on hypothetical situations ;" (Emphasis ours) Based on the above, a TTRA which is based on a hypothetical situation would fall under the "No-Ruling Areas". Considering that there is no clear indication that the subject TTRA involves transaction from which a royalty income shall be derived, and hence no taxable income yet for which a treaty relief may be sought, then this is a hypothetical case which evidently falls within the cases covered by Section 2 of Revenue Bulletin 1-2003. Therefore, this Office declines to rule on the requested application. CEDScA Please be guided accordingly. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue