ITAD Ruling No. 030-99

October 7, 1999 ITAD RULING NO. 030-99 RP-Singapore Article 11 142-95 Perez & Associates Law Office 8TH Floor, NGF Champaca Bldg., #156 Amorsolo Street, Legaspi Village, Makati City Attention: Atty . Cecilia O . Perez Partner, Perez & Associates Law Office Gentlemen : This refers to your letter dated June 4, 1999, requesting on behalf of your client, NOKIA PHILIPPINES, INC. (Nokia RP) for a ruling on the preferential tax treaty rate of 15% to be withheld on interests payments to NOKIA ASIA PTE. LTD. (Nokia Asia) of Singapore, pursuant to RP-Singapore Tax Treaty. It is represented that Nokia Asia with principal office at 438B Alexandra Road, #07-00 Alexandra Technopark, Singapore 119968, is a non-resident foreign corporation duly organized and existing under and by virtue of the laws of Singapore; that it has no permanent establishment in the Philippines as evidenced by its Certificate of Non-Registration from Securities and Exchange Commission dated July 21, 1999; that on March 10, 1999, a Loan Agreement was entered into by and between Nokia Asia and Nokia RP in the amount of US$5,000,000.00; that the interest on the Loan shall be payable in United States dollars and computed based on existing London Interbank Offer Rate (LIBOR) plus margin of One Per Cent (1%) upon drawdown. cdlex In reply, please be informed that Article 11 of the RP-Singapore Tax Treaty provides as follows: "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 State. "2. However, such interest may be taxed in the Contracting State in which it arises, and according to the law of that State, but if the recipient is the beneficial owner of the interest the tax so charged shall not exceed 15 per cent of the gross amount of the interest. The competent authorities of the Contracting State shall by mutual agreement settle the mode of application of this limitation. llcd "3. The term interest as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage, and whether or not carrying a right to participate in the debtors profits, and in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures, as well as income assimilated to income from money lent by the taxation law of the State in which the income arises, including interest on deferred payment sales. Penalty charges for late payment shall not be regarded as interest for purposes of this Article. "xxx xxx xxx" Such being the case, the interest income to be remitted by Nokia RP to Nokia Asia relative to the aforementioned loan shall be subject to the preferential tax rate of 15% (as per BIR Ruling No. 142-95, dated September 13, 1995.) 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.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group