Procedure for Claiming Tax Treaty Benefits for Dividend, Interest and Royalty Income of Nonresident Income Earners

October 24, 2016 REVENUE MEMORANDUM ORDER NO. 008-17 SUBJECT : Procedure for Claiming Tax Treaty Benefits for Dividend, Interest and Royalty Income of Nonresident Income Earners TO : All Internal Revenue Officers and Others Concerned SECTION 1. Background. The Philippines, a jurisdiction with a total of 40 effective tax treaties, with 2 more treaties waiting to enter into force and 2 pending ratification, qualifies as a jurisdiction with substantial network of tax treaties. To achieve the intent of these treaties of reducing double taxation and preventing fiscal evasion, administrative procedures in applying the provisions of these tax treaties must be duly established and enforced. HTcADC The United Nations recognizes that the 'single most important factor bearing on the compliance by nonresidents with domestic tax law is the use of source withholding by the source State.' 1 Moreover, the UN states that the 'use of final withholding taxes to collect tax from nonresidents is widespread and recognized internationally as a mechanism to collect tax.' 2 Towards this end, the Bureau of Internal Revenue (BIR), in its efforts to improve the efficient administration of Philippine tax treaties, adopts the self-assessment system and automatic withholding of taxes on income of nonresidents deriving Dividend, Interest and Royalty from sources within the Philippines at applicable tax treaty rates subject to post reporting validation. SECTION 2. Objectives . This Order seeks to provide for the new procedures in claiming preferential tax treaty benefits on dividend, interest and royalty income of nonresidents pursuant to effective tax treaties of the Philippines, thereby amending for this purpose, Revenue Memorandum Order (RMO) No. 72-2010. The foregoing objectives are achieved through: a. Creation of a new Certificate of Residence for Tax Treaty Relief (CORTT) Form; b. Enhancing BIR Forms 1601-F and 1604-CF; c. Full disclosure of income derived by nonresidents by filing accurate and timely BIR Forms 1601-F and 1604-CF by the withholding agent/income payor; CAIHTE d. Compliance check on the availment of tax treaty relief and the withholding tax obligations of the withholding agent/income payor; and e. Post reporting validation of final withholding tax payments on income of nonresidents deriving dividends, interest and royalty income in the Philippines. SECTION 3. Coverage . This Order shall apply only to DIVIDENDS, INTERESTS AND ROYALTIES, and not to any other type of income such as but not limited to business profit, income from services, et al. For income other than dividends, interest and royalties, the provisions in RMO 72-2010 shall continue to apply, and obtaining a ruling shall continue to be required. The reduced tax rate of 15 percent on intercorporate dividends paid to nonresident foreign corporations under Section 28 B (5) (b) of the National Internal Revenue Code (NIRC) shall be covered by a separate issuance. SECTION 4. Definition. 1. Nonresidents are not residents of the Philippines and not citizens thereof. For purposes of this Order, they are classified into: a. Nonresident alien not engaged in trade or business (NANETB) The aggregate period of stay in the Philippines does not exceed 180 days during any calendar year. b. Nonresident foreign corporations (NRFC) are corporations organized under foreign laws and not engaged in trade or business in the Philippines. 2. Beneficial Owner refers to the recipient of dividend, interest or royalty income that has the right to use and enjoy the said income unconstrained by a contractual or legal obligation to pass on the payment received to another person. 3 3. Certificate of Residence for Tax Treaty Relief (CORTT) Form This is the newly created BIR Form that replaces the old 0901 Forms intended for tax treaty relief application for dividend, interest and royalty incomes. This is composed of two parts: Part I: A. Applicable Tax Treaty; B. Information of Income Recipient/Beneficial Owner (Individual); aScITE C. Information of Income Recipient/Beneficial Owner (Non-Individual);and D. Certification of Competent Authority or Authorized Tax Office of Country of Residence. Part II: A. Information of Withholding Agent/Income Payor; B. Details of Withholding of Tax; C. Type of Income Earned within the Philippines in Respect to which Relief is claimed; D. Declaration of Income Recipient/Beneficial Owner; and E. Declaration of Withholding Agent/Income Payor. The CORTT Form shall serve as proof of residency of the nonresidents. Residency is a minimum requirement for the availment of preferential tax treaty rates or tax exemption under all effective tax treaties of the Philippines. 4. Noncompliant The nonresident and/or the withholding agent/income payor is noncompliant and ineligible to avail of preferential treaty rates or tax exemption based on any of the following reasons: a) Failure to meet the requirements of the provision of the tax treaty being invoked; b) Non-filing of 1601-F or 1604-CF and non-payment of withholding taxes due as required by the Tax Code; and c) Discrepancy between the information contained in the CORTT Form and the information on the 1601-F. There is discrepancy when the pieces of information provided in the CORTT Form and 1601-F are inconsistent. 5. Competent Authority (CA) authorized person from the taxing jurisdiction of a treaty partner to certify residency of nonresident income earners for tax treaty purposes. SECTION 5. General Policies and Guidelines . 1. The mandatory tax treaty relief applications (TTRA) shall no longer be filed with the International Tax Affairs Division (ITAD).In lieu of the TTRA, preferential treaty rates for dividends, interests and royalties shall be applied and used outright by the withholding agents upon submission of a CORTT Form by the nonresident. The use of the preferential rates shall be done through withholding final taxes at applicable treaty rates as shown in Annex A of this Order. 2. Nonresidents are allowed to use the prescribed certificate of residency of their country of residence ("prescribed certificate of residency").However, nonresidents are still required to accomplish A, B and C of Part I of the CORTT Form for monitoring purposes. If the prescribed certificate of residency is used, it shall be attached to the CORTT Form. DETACa 3. For dividend income purposes, the CORTT Form shall be valid for two (2) years from date of issuance. However, if a prescribed certificate of residency of the country of residence is used, the date of validity of the latter document will prevail over the two (2)-year period given. For interest and royalty income purposes, the CORTT Form shall be valid per contract. 4. Withholding agents or income payors can withhold at a reduced rate or exempt the nonresident based on the duly accomplished CORTT Form submitted to them. 5. Failure to submit a CORTT Form to the withholding agent/income payor would mean that the nonresident is not claiming any tax treaty relief and therefore such income be subject to the normal rate provided under the National Internal Revenue Code of 1997, as amended (Tax Code). 6. The ITAD and Revenue District Office (RDO) No. 39 shall be in charge of receiving and recording information stated in the CORTT. 7. Pertinent information from the CORTT Form and data collected from 1601-F and 1604-CF on availment of treaty rates and income payment made to nonresidents, in general, shall be accumulated and monitored by ITAD and RDO No. 39. Such data shall be used for conducting risk analysis, formulating policies, developing the country's treaty negotiating positions and generating management reports. 8. Compliance check and post reporting validation on withholding tax obligations and confirmation of appropriateness of availment of treaty benefits shall be part of BIR's regular audit investigations conducted by the RDO where the domestic withholding agent is registered. SECTION 6. Procedure for the Availment of Tax Treaty Relief . 1. Nonresidents claiming tax treaty relief shall submit a duly accomplished CORTT Form (Part I and II) or the prescribed certificate of residency with Part I (A, B and C) and II of the CORTT Form to their withholding agents/income payors before income is paid or credited. 2. The withholding agent/income payor shall file BIR Form 1601-F and BIR Form 1604-CF and shall pay the withholding taxes due in accordance with the Tax Code and existing Revenue Issuances. 3. The withholding agent/income payor shall submit an original of the duly accomplished CORTT (Part I and II) or the prescribed certificate of residency with Part I (A, B and C) and II of the CORTT Form to ITAD and RDO No. 39 within 30 days after payment of withholding taxes due on dividend, interest and royalty income of nonresident based on applicable tax treaty. HEITAD 4. The withholding agent shall submit an updated Part II of the CORTT Form within 30 days after payment of withholding taxes due in the following cases: a) If the CORTT Form filed with ITAD and RDO No. 39 is used for another dividend payment within its prescribed period of validity; and b) In case of staggered payment of interest and royalty income. SECTION 7. Penalties . Any violation of the provisions of this Order shall be subject to penalties provided in Section 250 and other pertinent provisions of the NIRC, as amended. Failure to supply accurate and complete information in the CORTT Form and BIR Forms 1601-F and 1604-CF will render the nonresident and withholding agent noncompliant. Noncompliance shall be a ground for the denial of the use of preferential treaty rates and the disallowance of the pertinent expense/s of the withholding agent. Furthermore, withholding agents/income payors that willfully fail to pay any tax, make a return, keep any record, or supply correct and accurate information or withhold or remit taxes withheld, or aids or abets any manner to evade any such tax or the payment thereof shall be liable under Sections 251 and 255 of the Tax Code. SECTION 8. Transitory Provision. Nonresidents who already filed TTRAs with the BIR on dividend, interest and royalty income prior to the effectivity of this Order will be allowed to use the tax treaty rates invoked based on effective tax treaties of the Philippines with other countries. However, the same will be subjected to compliance check. For existing TTRAs with the BIR with supporting documents, ITAD will use the submitted information in creating a database for purposes of tax treaty relief availment. If the requisite certificate of residency is not available in the submitted documents, the withholding agents/income payor will be requested to submit the same. SECTION 9. Repealing Clause . The provisions of RMO 72-2010 and any revenue issuance inconsistent with this Order are deemed revoked, repealed, or modified accordingly. SECTION 10. Effectivity . This Order shall take effect after 90 days upon signing to afford nonresident income earners time to secure the required CORTT Form or prescribed certificate of residency from their respective countries of residence. aDSIHc (SGD.) CAESAR R. DULAY Commissioner of Internal Revenue ANNEX A Country Country Code Dividend Rates Australia AU 15% where relief, either by way of credit as described in paragraph 2 of Article 24 or relief by way credit as described in the second sentence of paragraph 4 of Article 24, is given to the beneficial owner of the dividends 25% in any other case Austria AT 10% dividends if the beneficial owner is a company which holds directly at least 10 per cent either of the voting shares of the company paying the dividends or of the total shares issued by that company during the period of six months immediately preceding the date of payments of the dividends 25% in all other cases Bahrain BH 10% if the beneficial owner is a company (excluding partnerships) which holds directly at least ten per cent (10%) of the capital of the paying company 15% Bangladesh BD 10% if the beneficial owner is a company (excluding partnerships) which holds directly at least 25 per cent of the capital of the paying company 15% in all other cases Belgium BE 10% if the beneficial owner is a company which holds directly at least 10 per cent of the capital of the company paying the dividends 15% in all other cases Brazil BR 15% if the recipient is a company including a partnership 25% in all other cases Canada CA 15% paid to a company which is a resident of Canada which controls at least 10 per cent of the voting power of the company paying the dividend 25% in all other cases China CN 10% if the beneficial owner is a company which holds directly at least 10 per cent of the capital of the company paying the dividends 15% in all other cases Czech CZ 10% if the beneficial owner is a company which holds directly at least 10 per cent of the capital of the company paying the dividends 15% in all other cases Denmark DK 10% if the beneficial owner is a company (other than a partnership) which holds directly at least 25 per cent of the capital of the company paying the dividends 15% in all other cases Finland FI 15% if the recipient is a company (excluding partnership) owning at least 10 per cent of the voting stock of the company paying the dividends. France FR 10% if the recipient is a company (excluding partnership) which holds directly at least 10 per cent of the voting shares of the company paying the dividends 15% in all other cases Germany DE 5% if the beneficial owner is a company (other than a partnership) which holds directly at least 70 per cent of the capital of the company paying the dividends 10% if the beneficial is a company (other than a partnership) which holds directly at least 25 per cent of the capital of the company paying the dividends 15% in all other cases Hungary HU 15% if the beneficial owner is a company which holds directly at least 25 percent of the capital of the paying company 20% in all other cases India IN 15% if the beneficial owner is a company which owns at least ten per cent of the shares of the company paying the dividends 20% in all other cases Indonesia ID 15% if the beneficial owner is a company which holds directly at least 25 percent of the capital of the paying company 20% in all other cases Israel IL 10% if the beneficial owner is a company (excluding partnership) which holds directly at least 10 percent of the capital of the paying company 15% in all other cases Italy IT 15% if the recipient is the beneficial owner of the dividends Japan JP 10% if the beneficial owner is a company which holds directly at least 10 per cent either of the voting shares of the company paying the dividends or of the total shares issued by that company during the period of six months immediately preceding the date of payment of the dividends, or dividends paid by a company, being a resident of the Philippines, registered with the Board of Investments and engaged in preferred pioneer areas of investment under the investment incentives laws of the Philippines to a resident of Japan, who is the beneficial owner of the dividends 15% in all other cases Korea KR 10% if the beneficial owner is a company (other than a partnership) which holds directly at least 25 per cent of the capital of the company paying the dividends, or dividends paid by a company, being a resident of the Philippines, registered with the Board of Investments and engaged in preferred pioneer areas of investment under the investment incentives laws of the Philippines to a resident of Korea 25% in all other cases Kuwait KW 10% if the beneficial owner is a company (excluding partnership) which holds directly at least 10 percent of the capital of the paying company 15% in all other cases Malaysia MY 15% if the recipient is a company 25% in all other cases Netherlands NL 10% if the recipient is a company the capital of which is wholly or partly divided into shares and which holds directly at least 10 per cent of the capital of the company paying the dividends 15% in all other cases New Zealand NZ 15% if the beneficial owner is a company 25% in all other cases Nigeria NG 12.5% if the beneficial owner is a company (excluding partnership) which holds directly at least 10 percent of the capital of the paying company 15% in all other cases Norway NO 15% if the beneficial owner is a company which controls directly or indirectly at least 10 per cent of the voting power in the company paying the dividends 25% in all other cases Pakistan PK 15% if the beneficial owner is a company (excluding partnership) which holds directly at least 25 per cent of the capital of the paying company during the part of the paying company's taxable year which precedes the date of payment of the dividends and during the whole of its prior taxable year, if any 25% in all other cases Poland PL 10% if the beneficial owner is a company (excluding partnerships) which holds directly at least 25 per cent of the capital of the paying company 15% in all other cases Qatar QA 10% if the beneficial owner is a company (excluding partnership) which holds directly at least 10 percent of the capital of the paying company 15% in all other cases Romania RO 10% if the recipient is a company (excluding partnership) and during the part of the paying corporations taxable year which precedes the date of payment of the dividends and during the whole of its prior taxable year (if any),at least 25 per cent of the outstanding shares of the voting stock of the paying corporation was owned by the recipient corporation 15% in all other cases Russia RU 15% if the recipient is the beneficial owner of the dividends Singapore SG 15% if the recipient is a company (including partnership) and during the part of the paying company's taxable year which precedes the date of payment of the dividend and during the whole of its prior taxable year (if any),at least 15 per cent of the outstanding shares of the voting stock of the paying company was owned by the recipient company 25% in all other cases Spain ES 10% if the recipient is a corporation (excluding partnership) which holds directly at least 10 per cent of the voting shares of the company paying the dividends 15% in all other cases Sweden SE 10% if the beneficial owner is a company (excluding partnerships) which holds directly at least 25 per cent of the capital of the paying company 15% in all other cases Switzerland CH 10% if the beneficial owner is a company (excluding partnerships) which holds directly at least 10 per cent of the capital of the paying company 15% in all other cases Thailand TH 15% if the company paying the dividends is a Philippine company or if the company paying the dividends is a Thai company engaged in an industrial undertaking 20% if the company paying the dividends is a Thai company not engaged in an industrial undertaking Turkey TR 10% if the beneficial owner is a company (excluding partnership) which holds directly at least 25 percent of the capital of the paying company 15% in all other cases United Arab Emirates AE 10% if the beneficial owner is a company (excluding partnerships) which holds directly at least 10 per cent of the capital of the paying company 15% in all other cases United Kingdom of Great Britain and Northern Ireland GB 15% if the beneficial owner is a company which controls directly or indirectly at least 10 per cent of the voting power in the company paying the dividends 25% in all other cases United States of America US 20% when the recipient is a corporation, if during the part of the paying corporation's taxable year which precedes the date of payment of the dividend and during the whole of its prior taxable year (if any),at least 10 percent of the outstanding shares of the voting stock of the paying corporation was owned by the recipient corporation. 25% Vietnam VN 10% if the beneficial owner is a company (excluding partnerships) which holds directly at least 25 per cent of the capital of the paying company 15% in all other cases Country Country Code Interest Rates Australia AU 10% in respect of public issues of bonds, debentures or similar obligations and paid by a company which is a resident of the Philippines to a resident of Australia 15% Interest derived by the Government of a Contracting State, or by any other body exercising governmental functions in, or in a part of, a Contracting State, or by a bank performing central banking functions in a Contracting State, shall be exempt from tax in the other Contracting State. Austria AT 10% if the interest is paid by a resident of the Philippines to a resident of Austria in respect of public issues of bonds, debentures or similar obligations or if the interest is paid by a company which is a resident of the Philippines, registered with the Board of Investments and engaged in preferred pioneer areas of investment under the investment incentives laws of the Philippines to a resident of Austria, who is the beneficial owner of the interest 15% Interest arising in a Contracting State and derived by the government of the other Contracting State including political subdivisions and local authorities thereof, the Central Bank of that other Contracting State and any financial institution wholly-owned or controlled by that government, or by any resident of that other Contracting State with respect to debt-claims guaranteed or indirectly financed by the government of that other Contracting State including political subdivisions and local authorities thereof, the Central Bank of that other Contracting State and any financial institution wholly-owned or controlled by that government shall be exempt from tax in the first-mentioned Contracting State. For the purpose of this paragraph, the term "financial institution wholly-owned or controlled by the government" means: xxx xxx xxx b) in the case of the Philippines the Central Bank of the Philippines and the Development Bank of the Philippines; and c) any such financial institution the capital of which is wholly-owned or controlled by the government of either Contracting State, other than those referred to in subparagraphs (a) and (b) above, as may be agreed from time to time between the governments of the Contracting States. Bahrain BH 10% if the beneficial owner of the income from Debt-Claims is a resident of the other Contracting State Income from Debt-Claims paid by a Contracting State to the government of the other Contracting State or political subdivision or local authority thereof shall be exempt from tax in the first-mentioned State. Bangladesh BD 15% if the beneficial owner of the interest is a resident of the other Contracting State Interest arising in a Contracting State and derived by the Government of the other Contracting State, a local authority, the Central Bank thereof or any financial institution wholly owned by that Government, or by any other resident of that other Contracting State with respect to debt-claims indirectly financed by the Government of that other Contracting State, a local authority, the Central Bank thereof or any financial institution wholly owned by that Government, shall be exempt from tax in the first-mentioned State. Belgium BE 10% if the beneficial owner of the interest is a resident of the other Contracting State Interest shall be exempted from tax in the Contracting State in which it arises if it is: a) interest paid in respect of a bond, debenture or other similar obligation of the Government of that Contracting State or of a political subdivision or local authority thereof; and b) Interest paid in respect of a loan made, guaranteed or insured or a credit extended, guaranteed or insured by such institution as is specified and agreed in letters exchanged between the competent authorities of the Contracting States. Brazil BR 10% if interest is paid by a company which is a resident of the Philippines to a resident of Brazil in respect of public issues of bonds, debentures or similar obligations 15% if the recipient is the beneficial owner of the interest Interest arising in a Contracting State and paid to the Government of the other Contracting State, a political subdivision thereof or any agency (including a financial institution) wholly owned by that Government, or political subdivision shall be exempt from tax in the first-mentioned Contracting State: b) interest arising from securities, bonds or debentures issued by the Government of a Contracting State, a political subdivision thereof or by any agency (including a financial institution) owned by that Government shall be taxable only in that State. Canada CA 10% if the interest is in respect of public issues of bonds, debentures or similar obligations and paid by a company which is a resident of the Philippines to a resident of Canada 15% if the interest is taxable in the other Contracting State a) interest arising in a Contracting State and paid in respect of a bond, debenture or other similar obligation of the government of that Contracting State or of a political subdivision or local authority thereof shall, provided that the interest is beneficially owned by a resident of the other Contracting State, be taxable only in that other State; b) interest arising in the Philippines and paid to a resident of Canada shall be taxable only in Canada if it is paid in respect of a loan made, guaranteed or insured, or a credit extended, guaranteed or insured by the Export Development Corporation. China CN 10% if the recipient is the beneficial owner of the interest Interest arising in a Contracting State and derived by the Government of the other Contracting State, a local authority and the Central Bank thereof or any financial institution wholly owned by the Government of that other State, or by any other resident of that other State with respect to dept-claims indirectly financed by the Government of that other State, a local authority, and the Central Bank thereof or any financial institution wholly owned by the Government of that other State, shall be exempt from tax in the first-mentioned State. Czech CZ 10% if the beneficial owner of the interest is a resident of the other Contracting State Interest shall be exempted from tax in the Contracting State in which it arises if it is derived and beneficially owned by: a) the Government of the other Contracting State, including any political subdivision or local authority thereof, the Central Bank or any financial institution wholly owned by that Government; or b) a resident of the other Contracting State in connection with the loan or credit guaranteed by the Government of that other State. Denmark DK 10% if the beneficial owner of the interest is a resident of the other Contracting State Interest arising in a Contracting State and paid in respect of a loan made by or guaranteed or insured by the Government of the other Contracting State, the central bank of that other State or any agency or instrumentality (including a financial institution) owned or controlled by that Government shall be exempt from tax in the first-mentioned State. Finland FI 15% if the recipient is the beneficial owner of the interest the tax so charge 10 per cent of the gross amount of the interest in respect of public issues of bonds, debentures or similar obligations and paid by a company which is a resident of the Philippines to a resident of Finland Interest arising in a Contracting State and paid in respect of a bond, debenture or other similar obligation of the government of that Contracting State or of a political subdivision or local authority thereof shall, provided that the interest is beneficially owned by a resident of the other Contracting State be taxable only in that other State: b) interest arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in that other Contracting State if it is paid in respect of a loan made, guaranteed or insured, or a credit extended, guaranteed or insured by the Central Bank of the Philippines or the Finnish Export Credit Limited; c) interest arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in that other Contracting State if it is paid in respect of a loan made, guaranteed or insured, or a credit extended, guaranteed or insured by such lending institution as is specified and agreed in letters exchanged between the competent authorities of the Contracting States. France FR 15% if the recipient is the beneficial owner of the interest Exempt from tax in respect of a loan made, guaranteed or insured, or a credit extended, guaranteed or insured by (ii) in the case of the Philippines, the Central Bank of the Philippines or such lending institution as is specified and agreed in letters exchanged between the competent authorities of the Contracting States; Germany DE 10% if the beneficial owner of the interest is a resident of the other Contracting State Interest arising in the Republic of the Philippines and paid to the German Government, the Deutsche Bundesbank, the Kreditanstalt fuer Wiederaufbau or the Deutsche Gesellschaft fuer wirtschaftliche Zusammenarbeit (Entwicklungsgesellschaft) shall be exempt from Philippine tax. Interest arising in a Contracting State shall be exempt from tax in that State if it is derived in respect of a loan made, guaranteed or insured by a governmental instrumentality of the other Contracting State by the Central Bank in the case of the Republic of the Philippines, or any other instrumentality as is specified and agreed in letters exchanged between the competent authorities of the Contracting States. Hungary HU 15% if the recipient is the beneficial owner of the interest Interest arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in that other State, if the interest is paid in respect of: a) a bond, debenture or other similar obligation of the government of the first-mentioned Contracting State or a political subdivision or local authority thereof; or b) a loan made, refinanced, guaranteed or insured, or a credit extended, refinanced, guaranteed or insured by (i) in the case of the Philippines, the Central Bank of the Philippines; (ii) in the case of Hungary, the National Bank of Hungary; or (iii) other governmental agencies or lending institutions as may be specified and agreed in an exchange of notes between the competent authorities of the Contracting States. India IN 10% if the interest is received by a financial institution (including insurance companies) or in respect of public issues of bonds, debentures or similar obligations 15% in all other cases a) interest arising in a Contracting State shall be exempt from tax in that State provided it is derived and beneficially owned by: (i) the Government, a political subdivision or a local authority of the other Contracting State; or (ii) the Central Bank of the other Contracting State; (iii) other lending institutions as may be specified and agreed in letters exchanged between the competent authorities of the Contracting States. b) interest arising in a Contracting State shall be exempt from tax in that Contracting State to the extent approved by the Government of that State if it is derived and beneficially owned by any person [other than a person referred to in sub-paragraph (a)] who is a resident of the other Contracting State provided that the transaction giving rise to the debt-claim has been approved in this regard by the Government of the first-mentioned Contracting State. Indonesia ID 15% if the recipient is the beneficial owner of the interest 10% in respect of public issues of bonds, debentures or similar obligations Interest arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in that other State, if the interest is paid in respect of: (i) a bond, debenture or other similar obligation of the government of that State or a political subdivision or local authority thereof; or (ii) a loan made, guaranteed or insured, or a credit extended, guaranteed or insured by the Central Bank of the Philippines, or the "Bank Indonesia" (the Central Bank of Indonesia),or any other lending institution, as may be specified and agreed in letters exchanged between the competent authorities of the Contracting States. Israel IL 10% if the recipient is the beneficial owner of the interest Interest arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in that other State, if the interest is paid in respect of: a) a bond, debenture or other similar obligation of the government of the first-mentioned Contracting State or a political subdivision or local authority thereof; or b) a loan made, refinanced, guaranteed or insured, or a credit extended, refinanced, guaranteed or insured by (i) in the case of the Philippines, the Central Bank of the Philippines, (ii) in the case of Israel, the Bank of Israel, or (iii) other governmental agencies or lending institutions as may be specified and agreed in an exchange of notes between the competent authorities of the Contracting States. Italy IT 10% if the recipient is the beneficial owner of the interest in respect of public issues of bonds, debentures, or similar obligations and paid by a resident of one Contracting State to a resident of the other Contracting State 15% in all other cases Interest arising in a Contracting State shall be exempt from tax in that State if: a) the payer of the interest is the Government of that Contracting State or a local authority thereof; or b) the interest is paid to the Government of the other Contracting State or local authority thereof or any agency or instrumentality (including a financial institution) wholly owned by that other Contracting State or local authority thereof; or c) the interest is paid to any other agency or instrumentality (including a financial institution) in relation to loans made in application of an agreement concluded between the Governments of the Contracting States. Japan JP 10% if the recipient is the beneficial owner of the interest Interest arising in a Contracting State and derived by the Government of the other Contracting State including political subdivisions and local authorities thereof, the Central Bank of that other Contracting State or any financial institution wholly owned by that Government, or by any resident of the other Contracting State with respect to debt-claims guaranteed, insured or indirectly financed by the Government of that other Contracting State including political subdivisions and local authorities thereof, the Central Bank of that other Contracting State or any financial institution wholly owned by that Government shall be exempt from tax in the first-mentioned Contracting State. For the purposes of this paragraph, the term "financial institution wholly owned by the Government" means: xxx xxx xxx (b) In the case of the Philippines, the Development Bank of the Philippines and the Land Bank of the Philippines; and (c) Any such financial institution the capital of which is wholly owned by the Government of either Contracting State, other than those referred to in sub-paragraphs (a) and (b) above, as may be agreed from time to time between the Governments of the two Contracting States. Korea KR 10% if the interest is paid in respect of public issues of bonds, debentures or similar obligation 15% in all other cases Interest arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in that other State if the interest is paid in respect of: (i) a bond, debenture or other similar obligation of the government of that State or a political subdivision or local authority thereof, or (ii) a loan made, guaranteed or insured, or a credit extended, guaranteed or insured by: (aa) in the case of the Philippines, the Central Bank of the Philippines; (bb) in the case of Korea, the Bank of Korea, the Export-Import Bank of Korea, the Korea Exchange Bank; and (cc) other lending institutions as may be specified and agreed in letters of exchange between the competent authorities of the Contracting States. Kuwait KW 10% if the beneficial owner of the interest is a resident of the other State Interest arising in a Contracting State shall be exempt from tax if derived by or on: a) The government of the other Contracting State or any governmental institution or other entity thereof, as defines in paragraph 2 of Article 4; b) An institution or company which is a resident of the other Contracting State whose capital is wholly owned by the government or a governmental institution or other entity as define in paragraph 2 of Article 4 as agreed upon between the competent authorities of the two governments; c) Loans guaranteed by the government of the other contracting state or any governmental institution of other entity thereof, as defined in paragraph 2 of Article 4. Malaysia MY 15% if the recipient is the beneficial owner of the interest The Government of a Contracting State shall be exempt from tax in the other Contracting State in respect of interest derived by the Government from that other State. In the case of the Philippines, "Government" means the Government of the Republic of the Philippines and shall include: (i) the Central Bank of the Philippines; (ii) such institutions, the capital of which is wholly owned by the Government of the Republic of the Philippines, as may be agreed upon from time to time between the competent authorities of the Contracting States. Netherlands NL 10% (i) in connection with the sale on credit of any industrial, commercial or scientific equipment, or (ii) on any loan of whatever kind granted by a bank, or any other financial institution, (iii) in respect of public issues of bonds, debentures or similar obligations. 15% in all other cases Interest arising in one of the States and paid in respect of a bond, debenture or other similar obligation of the Government of that State or of a political subdivision or local authority thereof shall be exempt from tax in that State: xxx xxx xxx b) interest arising in one of the States and paid in respect of a loan made by or guaranteed or insured by the Government of the other State, the central bank of that other State or any agency or instrumentality (including a financial institution) owned or controlled by that Government shall be exempt from tax in the first-mentioned State. New Zealand NZ 10% if the recipient is the beneficial owner of the interest and in respect of, public issues of bonds, debentures or similar obligations and paid by a company which is a resident of the Philippines to a resident of New Zealand Interest derived by the Government of a Contracting State, or by any other body exercising governmental functions in, or in a part of, a Contracting State, or by a bank performing central banking functions in a Contracting State, shall be exempt from tax in the other Contracting State Nigeria NG 15% if the recipient is the beneficial owner of the interest Interest arising in a Contracting State shall be exempt from tax in that State if it is derived and beneficially owned by the Government of the other Contracting State or a local authority thereof or any agency or instrumentality of that Government or local authority Norway NO 15% Interest derived from sources within one of the Contracting States by a resident of the other Contracting States shall in all events be exempt from tax by the first-mentioned State if: a) the interest is beneficially owned by, or is paid by, a Contracting State, a political subdivision or local authority thereof or an instrumentality, subdivision or authority of a Contracting State which is not subject to tax by that State; b) the income received is from investments by both Contracting States in loans, stocks, bonds or other domestic securities, or from interest on their deposits by financing institutions owned, controlled, or enjoying refinancing from the government, and international or regional financing institutions established by the governments of both Contracting States. Pakistan PK 15% if the recipient is the beneficial owner of the interest a) interest arising in a Contracting State and paid in respect of a bond, debenture or other similar obligation of the government of that Contracting State or of a political subdivision or local authority thereof shall be exempt from tax in both the Contracting States; b) the Philippine tax on interest arising in the Philippines in respect of public issues of bonds, debentures or similar obligations and paid by a company which is a resident of the Philippines to a resident of Pakistan shall not exceed 10 per cent of the gross amount of the interest. a) the State Bank of Pakistan shall be exempt from Philippine tax with respect to interest from sources within the Philippines; b) the Central Bank of the Philippines shall be exempt from Pakistan tax with respect to interest from sources within Pakistan; c) the Government of a Contracting State shall be exempt from the tax of the other Contracting State with respect to interest on loans derived by that Government from sources within that other State; and d) any financial institution owned or controlled by the Government of a Contracting State shall be exempt from the tax of the other Contracting State with respect to interest on loans derived by that institution from sources within that other Contracting State. Poland PL 10% Interest arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in that other State if the interest is paid in respect of: (i) a bond, debenture or other similar obligation of the government of that State or a political subdivision or local authority thereof, or (ii) a loan or credit extended, guaranteed, insured or refinanced. (aa) in the case of the Philippines, the Central Bank of the Philippines, (bb) in the case of Poland, the Central Bank of Poland, and (cc) other lending institutions as may be specified and agreed in letters of exchange between the competent authorities of the Contracting States. Qatar QA 10% Interest arising in a Contracting State shall be exempt from tax in that State if the Beneficial Owner of the interest is: a) The other Contracting State itself or a political subdivision or a local authority of that State; and b) Any governmental owned and controlled institution of the other Contracting State created under the national legislation of that State. Romania RO 10% if such interest is paid: (i) in connection with the sale on credit of any industrial, commercial or scientific machine or equipment, or similar installation, or (ii) on any loan of whatever kind granted by a bank, or (iii) in respect of public issues of bonds, debentures or similar obligations. 15% in connection with the sale on credit of any means of transport and in all other cases a) interest arising in a Contracting State and paid in respect of a bond, debenture or other similar obligation of the government of that Contracting State or of a political subdivision, a local authority, or a territorial administrative unit thereof shall, provided that the interest is beneficially owned by a resident of the other Contracting State, be taxable only in that State; b) interest arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in that other Contracting State if it is paid in respect of a loan made, guaranteed or insured, or a credit extended, guaranteed or insured by a government instrumentality of the other Contracting State, as by the National Bank of Romania, in the case of Romania and by the Central Bank of the Philippines in the case of the Philippines, or by any other instrumentality as is specified and agreed in letters exchanged between the Competent Authorities of the Contracting States. Russia RU 15% if the recipient is the beneficial owner of the interest Interest paid by a Contracting State to the government of the other State or a political subdivision or local authority thereof shall be taxable only in that other State. Singapore SG 15% if the recipient is the beneficial owner of the interest a) interest arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in that other Contracting State if it is paid in respect of a loan made, guaranteed or insured, or a credit extended, guaranteed or insured, by such institutions as are specified and agreed in letters exchanged between the competent authorities of the Contracting States; and b) the Philippine tax on interest arising in the Philippines in respect of public issues of bonds, debentures or similar obligations and paid by a company which is a resident of the Philippines to a resident of Singapore shall not exceed 10 per cent of the gross amount of the interest. Spain ES 10% if such interest is paid: (i) in connection with the sale on credit of any industrial, commercial or scientific equipment, or (ii) in respect of issues of bonds, debentures or similar obligations offered to the general public. 15% in all other cases a) Interest arising in a Contracting State and paid to a resident of the other Contracting State in respect of a bond, debenture or other similar obligation of the Government of the first-mentioned Contracting State or of a political subdivision or local authority thereof shall, provided that the interest is beneficially owned by a resident of the other Contracting State, be taxable only in that other Contracting State; b) Interest arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in that other Contracting State if it is paid in respect of a loan made, guaranteed or insured, or a credit extended, guaranteed or insured by: (i) in the case of Spain, the Bank of Spain and the Spanish official credit institutions, and (ii) in the case of the Philippines, the Central Bank of the Philippines. or such lending institution as is specified and agreed in letters exchanged between the competent authorities of the Contracting States. Sweden SE 10% if the beneficial owner of the interest is a resident of the other Contracting State Interest arising in a Contracting State and paid to a resident of the other Contracting State shall be taxable only in that other State, if the interest is paid in respect of: a) a bond, debenture or other similar obligation of the government of the first-mentioned Contracting State or a political subdivision or a local authority thereof; or b) a loan made, refinanced, guaranteed or insured, or a credit extended, refinanced, guaranteed or insured by: (i) in the case of the Philippines, Bangko Sentral ng Pilipinas (BSP); (ii) in the case of Sweden, the Central Bank of Sweden, the Swedish International Development Cooperation Agency (SIDA),the Swedish Export Credit Corporation (SEK),the Swedish Export Credits Guarantee Board (Exportkreditnamndem) or any other institution of a public character with the objective to promote exports or development; (iii) other governmental agencies or lending institutions as may be specified and agreed in an exchange of notes between the competent authorities of the Contracting States. Switzerland CH 10% if the recipient is the beneficial owner of the interest Thailand TH 10% if the recipient is the beneficial owner of the interest and (i) it arises in Thailand and is received by Philippine financial institutions (including insurance companies); (ii) it arises in the Philippines in respect of public issues of bonds, debentures or similar obligations; 15% if it arises in the Philippines 25% if it arises in Thailand Interest arising in a Contracting State and paid to the Government of the other Contracting State shall be exempt from tax in the first-mentioned Contracting State the term "Government" a) in the case of the Philippines, means: (i) the Government of the Republic of the Philippines; (ii) the Central Bank of the Philippines; (iii) the Development Bank of the Philippines; and (iv) such other institutions, the capital of which is wholly owned by the Government of the Republic of the Philippines or any local authorities, as may be agreed from time to time between the competent authorities of the two Contracting States. Turkey TR 10% if the beneficial owner of the interest is a resident of the other State Interest arising in a Contracting State and received by the government of the other Contracting State including a political subdivision or a local authority thereof or the Central Bank of that other Contracting State shall be taxable only in that other Contracting State United Arab Emirates AE 10% if the beneficial owner of the interest is a resident of the other Contracting State Interest as defined in paragraph 4 of this Article arising in a Contracting State shall be exempt from tax in that State if it is derived in respect of a loan made, guaranteed, or insured by the government of the other Contracting State or political subdivision or local authority or local governments, including financial institution wholly owned by that government, or any other instrumentality as is specified and agreed in letters exchanged between the competent authorities of the Contracting States. United Kingdom of Great Britain and Northern Ireland GB 10% if the interest is paid by a company in respect of the public issue of bonds, debentures or similar obligations 15% Interest arising in a Contracting State shall be exempt from tax in that State if it is derived and beneficially owned by: a) the Government of the other Contracting State, a political subdivision or local authority thereof or an instrumentality of that other State; or b) a resident of the other Contracting State in respect of a loan made, guaranteed or insured by such instrumentality of that other State as is specified and agreed in letters exchanged between the competent authorities of the Contracting States. United States of America US 10% with respect to public issues of bonded indebtedness 15% interest derived by a) One of the Contracting States, or an instrumentality thereof (including the Central Bank of the Philippines, the Federal Reserve Banks of the United States, the Export-Import Bank of the United States, the Overseas Private Investment Corporation of the United States, and such other institutions of either Contracting State as the competent authorities of both Contracting States may determine by mutual agreement),or b) A resident of one of the Contracting States with respect to debt obligations guaranteed or insured by that Contracting State or an instrumentality thereof. Shall be exempt from tax by the other Contracting State. Vietnam VN 15% if the recipient is the beneficial owner of the interest Interest paid by a Contracting State to the government of the other State or political subdivision or local authority thereof shall be taxable only in that other State. Country Country Code Royalty Rates Australia AU 15% where the royalties are paid by an enterprise registered with the Philippine Board of Investments and engaged in preferred areas of activities 25% in all other cases Austria AT 10% if the royalties are paid by a company, which is a resident of the Philippines registered with the Board of Investments and engaged in preferred pioneer areas of investments under the investment incentives laws of the Philippines, to a resident of Austria, who is the beneficial owner of the royalties 15% if the recipient is the beneficial owner of the royalties Bahrain BH 10% in all other cases provided that the recipient is the beneficial owner of the royalties 15% if the beneficial owner of the royalties is a resident of the other Contracting State and the royalties are arising from the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films or tapes for television or broadcasting Bangladesh BD 15% if the beneficial owner of the royalties is a resident of the other Contracting State Belgium BE 15% if the beneficial owner of the royalties is a resident of the other Contracting State Brazil BR 15% shall only apply to royalties paid by an enterprise registered with the Philippine Board of Investment and engaged in preferred areas of activities 25% in all other cases provided that the recipient is the beneficial owner of the royalties Canada CA 25% in the Philippines The lowest rate of Philippine tax that may be imposed on royalties of the same kind paid in similar circumstances to a resident of a third State China CN 10% if the recipient is the beneficial owner of the royalties and the royalties are arising from the use of, or the right to use, any patent, trade mark, design or model, plan, secret formula or process, or from the use of, or the right to use, industrial, commercial, or scientific equipment, or for information concerning industrial, commercial or scientific experience 15% if the recipient is the beneficial owner of the royalties and the royalties are arising from the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films or tapes for television or broadcasting Czech CZ 10% if the beneficial owner of the royalties is a resident of the other Contracting State and the royalties are arising from the use of, or the right to use, any copyright of literary, artistic or scientific work, other than that mentioned in sub-paragraph (b),any patent, trade mark, design or model, plan, secret formula or process, or from the use of, or the right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience 15% if the beneficial owner of the royalties is a resident of the other Contracting State and the royalties are arising from the use of, or the right to use, any copyright of cinematograph films, and films or tapes for television or radio broadcasting Denmark DK 15% if the recipient is the beneficial owner of the royalties Finland FI 15% where the royalties are paid by an enterprise registered with and engaged in preferred areas of activities, and also royalties in respect of cinematographic films or tapes for television or broadcasting and royalties for the use of, or the right to use, any copyright of literary, artistic or scientific work 25% in all other cases France FR 15% if the beneficial owner of the royalties is a resident of the other Contracting State Germany DE 10% if the beneficial owner of the royalties is a resident of the other Contracting State Hungary HU 15% if the recipient is the beneficial owner of the royalties The lowest rate of Philippine tax that may, under similar circumstances, be imposed on royalties derived by a resident of a third State India IN 15% if the recipient is the beneficial owner of the royalties and provided that such royalties are payable by an enterprise which is registered with the Board of Investment Indonesia ID 15% where the royalties are paid by an enterprise registered with the Philippine Board of Investments, and engaged in preferred areas of activities as determined by the said Board 25% in all other cases Israel IL 15% if the recipient is the beneficial owner of the royalties The lowest rate of Philippine tax that may, under similar circumstances, be imposed on royalties derived by a resident of a third State Italy IT 15% if the recipient is the beneficial owner of the royalties and where the royalties are paid by an enterprise registered with the Philippine Board of Investments and engaged in preferred areas of activities and also royalties in respect of cinematographic films or tapes for television or broadcasting 25% in all other cases If the Philippines agrees to a lower rate of tax on royalties of the same kind paid in similar circumstances to a resident of a third state, then this lower rate shall likewise be applied to residents of Italy Japan JP 10% in all other cases provided that the recipient is the beneficial owner of the royalties or if the royalties are paid by a company, which is a resident of the Philippines registered with the Board of Investments and engaged in preferred pioneer areas of investments under the investment incentives laws of the Philippines, to a resident of Japan, who is the beneficial owner of the royalties. 15% if the recipient is the beneficial owner of the royalties and the royalties are paid in respect of the use of or the right to use cinematograph films and films or tapes for radio or television broadcasting Korea KR 10% if the royalties are paid by a company, which is a resident of the Philippines registered with the Board of Investments and engaged in preferred pioneer areas of investments under the investment incentives laws of the Philippines, to a resident of Korea, who is the beneficial owner of the royalties 15% if the recipient is the beneficial owner of the royalties Kuwait KW 20% if the beneficial owner of the royalties is a resident of the other contracting state Malaysia MY 15% if the recipient is the beneficial owner of the royalties and where the royalties are paid by a registered enterprise as well as royalties for the use of, or the right to use, cinematograph films, or tapes for radio or television broadcasting 25% in all other cases Netherlands NL 10% if the recipient is the beneficial owner of the royalties and where the royalties are paid by an enterprise registered, and engaged in preferred areas of activities in that State 15% in all other cases New Zealand NZ 15% if the recipient is the beneficial owner of the royalties Nigeria NG 20% if the recipient is the beneficial owner of the royalties Norway NO 25% when the royalties are taxable in the other Contracting State and for amount paid for the use of, or the right to use, motion picture films, films or tapes for radio or television broadcasting 7.5% when the royalties are taxable in the other Contracting State and paid for the use of or the right to use containers The lowest rate of the Philippine tax that may be imposed on royalties of the same kind paid in similar circumstances to a resident of a third State Pakistan PK 15% where the royalties are paid by an enterprise registered with, and engaged in preferred areas of activities in that Contracting State 25% in all other cases Poland PL 15% Qatar QA 15% if the beneficial owner of the royalties is a resident of the other contracting state Romania RO 10% where the royalties are paid by an enterprise registered with the Board of Investments and engaged in preferred pioneer areas of activities 15% in respect of cinematographic films and tapes for television of broadcasting 25% in all other cases Russia RU 15% Singapore SG 15% if the recipient is the beneficial owner of the royalties and where the royalties are paid by an enterprise registered with the Philippine Board of Investments and engaged in preferred areas of activities and also royalties in respect of cinematographic films or tapes for television or broadcasting 25% in all other cases Spain ES 10% if the recipient is the beneficial owner of the royalties and where the royalties are paid by an enterprise registered with the Philippine Board of Investments and engaged in preferred areas of activities 15% in all other cases provided that the recipient is the beneficial owner of the royalties 20% if the recipient is the beneficial owner of the royalties and in respect of cinematographic films or tapes for television or broadcasting Sweden SE 15% if the beneficial owner of the royalties is a resident of the other Contracting State Switzerland CH 15% Thailand TH 15% if the recipient is the beneficial owner of the royalties and if the royalties are paid: (i) by an enterprise registered with the Philippine Board of Investments and engaged in preferred areas of activities; or (ii) by an enterprise under the promotion of the Board of Investments of Thailand; or (iii) in respect of cinematographic films or tapes for television or broadcasting. 25% in all other cases provided that the recipient is the beneficial owner of the royalties Turkey TR 10% if the beneficial owner of the royalties is a resident of the other Contracting State and the royalties are arising royalties for the use of, or the right to use, cinematographic films, or films or tapes for television or radio broadcasting 15% royalties are arising from the use of, or the right to use, any copyright of literary, artistic or scientific work, any patent, trade mark, design or model, plan, secret formula or process, or from the use of, or the right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience United Arab Emirates AE 10% if the beneficial owner of the royalties is a resident of the other Contracting State United Kingdom of Great Britain and Northern Ireland GB 15% where the royalties are paid: (i) by an enterprise registered with the Philippine Board of Investments and engaged in preferred areas of activity; or (ii) in respect of cinematograph films or tapes for television or radio broadcasting. 25% in all other cases United States of America US 15% where the royalties are paid by a corporation registered with the Philippine Board of Investments and engaged in preferred areas of activities 25% of the gross amount of royalties The lowest rate of Philippine tax that may be imposed on royalties of the same kind paid under similar circumstances to a resident of a third State Vietnam VN 15% if the recipient is the beneficial owner of the royalties Certificate of Residence (for Tax Treaty Relief) PART I Certificate of Residence (for Tax Treaty Relief) PART II Footnotes 1. 1.3 Connection between tax compliance and source withholding, Chapter IV, United Nations Handbook on Selected Issues in Administration of Double Tax Treaties for Developing Countries. 2. Ibid. 3. OECD Commentary on Model Tax Convention on Income and Capital, par. 12.4 of Art. 10; par. 10.2 of Art. 11; and par. 4.3 of Art. 12.