ITAD Ruling No. 014-00

January 25, 2000 ITAD RULING NO. 014-00 RP-Japan, Art. 11 UN-014-1-9-95 138-94 Joaquin Cunanan & Co. 14/F Multinational Bancorporation Centre 6805 Ayala Avenue, Makati City Attention: Mr . George J . Lavadia Principal Tax Services Department Gentlemen : This has reference to your application for availment of the 15% final withholding tax rate on interest payments made by your client GNF (Philippines) Inc. (GNF) to Nikko Gould Foil Company, Ltd. (Nikko) pursuant to RP-Japan Tax Treaty. It is represented that Nikko is a non-resident foreign corporation organized and existing under the laws of Japan with business address at 10-1 Toranomon 2-Chome Minato-ku, Tokyo 105-8407 Japan; that GNF is a domestic corporation organized and existing under Philippine laws with business address at 117 East Science Avenue, Special Export Processing Zone, Laguna Technopark, Bian, Laguna; that on April 28, 1999, GNF obtained a loan of US $8,000,000.00 from Nikko; that the said loan is effective for three (3) years from the date of initial advance and subject to interest at LIBOR rate per annum based on the outstanding balance. In reply, please be informed that Article 11 of the RP-Japan Tax Treaty states that: "Article 11 (1) Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other Contracting State. (2) However, such interest may also be taxed in that 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: (a) 10 per cent of the gross amount of the interest if the interest is paid in respect of government securities or bonds or debentures; (b) 15 per cent of the gross amount of the interest in all other cases." Considering that Nikko is the recipient and the beneficial owner of the interest payment made by GNF and since the interest income was not generated from government securities, bonds and debentures, the applicable withholding tax rate is 15% of the total amount of the interest payment. (BIR Ruling Nos. UN-014-1-9-95 and 138-94). This ruling is being issued on the basis of facts as represented. However, if upon investigation, it will be disclosed or discovered that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group