September 8, 1998

BIR RULING NO. 127-98

000-00-127-98

SGV & Co.

6760 Ayala Avenue
Makati City

Attention: Atty. C . P. Noel

Gentlemen :

This refers to your letter dated June 10, 1998 requesting on behalf of your
clients, Banker's Trust Company Singapore (BTCS) and Bankers Trust
International Asia Ltd. (BTIA), for a ruling that the interest income of BTCS and
BTIA, both non-resident foreign corporations, from peso placements or deposits in
the Philippines is subject to the preferential tax rate of 15% withholding tax
pursuant to Article 11(2) of the RP-Singapore Tax Treaty, as implemented by
Revenue Regulations No. 7-82. LLpr

It is represented that BTCS and BTIA are corporations organized and

existing under the laws of Singapore; that in 1997, BTCS and BTIA entered into
several Philippine peso placements with Deutsche Bank, Manila Branch which
will mature in 1998, that the interest income earned by BTCS and BTIA on these
peso placements representing the discount given by Deutsche Bank were subjected
to withholding tax at the rate of 20%; that it is part of the business purpose for
which BTCS and BTIA were formed to invest and make placements with the end
view of making profits for their respective companies; that for this reason, they
intend to venture and invest in peso placements with the banking industries all over
Asia; that BTCS and BTIA do not engage in trade or business in the Philippines
through a permanent establishment; and that their sole business activity in the
Philippines is their peso placements in Deutsche Bank, Manila Branch.

In reply, please be informed that Article 11(2) and (3) of the RP-Singapore
Tax Treaty provide, viz:

"Article 11

Copyright 2016 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia First Release 2016 1
 "Interest

"(1) . . .

"(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.

"(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 debtor's 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. llcd

xxx xxx xxx"

Moreover, Section 13(2)(c) of Revenue Regulations No. 7-82 provides:

"SEC. 13. Interest.

"(1) . . .

"(2) Interest arising in the Philippines and paid to a resident of

Singapore is taxed as follows:

(a) Exempted if paid in respect of a loan made,

guaranteed or insured by such institutions as are
specified and agreed in letters exchanged between
competent authorities of the Philippines and
Singapore;

(b) 10% of the gross amount of interest in respect of

public issues of bonds, debentures or similar
obligations and paid by a Philippine company;

(c) 15% of the gross amount of interest in all other

cases.

considering that the interest income derived by BTCS and BTIA in the Philippines
does not arise from (a) and (b) of Section 13(2) of Revenue Regulations No. 7-82,
Copyright 2016 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia First Release 2016 2
 implementing the RP-Singapore Tax Treaty and considering further that peso
placement partakes the nature of an ordinary deposit, its interest income derived
from the peso placements in the Philippines by BTCS and BTIA are subject to the
preferential tax rate of 15% withholding tax imposed under Section 13(2)(c) of
Revenue Regulations No. 7-82.

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. dctai

Very truly yours,

(SGD.) BEETHOVEN L. RUALO

Commissioner
Bureau of Internal Revenue

Copyright 2016 CD Technologies Asia, Inc. and Accesslaw, Inc. Philippine Taxation Encyclopedia First Release 2016 3