June 23, 2009 ITAD BIR RULING NO.

018-09 Articles 4 (Resident), 10 (Dividends) and 25 (Non-Discrimination); Philippines-Norway tax treaty Det Norske Veritas AS Philippine Branch Maritime SEA & ANZ Ground Floor, G-5, Velco Center Corner Ocampo and Delgado Streets Port Area, Manila Attention: Mr. Antonio C. Leosala Country Manager Gentlemen : This refers to your letter dated August 1, 2006, 1 requesting confirmation that branch profits remitted by Det Norske Veritas AS Philippine Branch (Det Norske Philippine Branch) to Det Norske Veritas AS (Det Norske) 2 are exempt from the 15 percent branch profits remittance tax (BPRT) pursuant to paragraphs 1 and 2, Article 25 of the Convention between the Republic of the Philippines and the Kingdom of Norway for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and on Capital (Philippines-Norway tax treaty). 3 Basic Facts It is represented that Det Norske is a corporation organized and existing under the laws of Norway with given address at Veristasveien 1, N-1322 Hvik, Norway; that Det Norske is a tax resident of Norway based on a Certificate of Residence No. 945748931 dated August 10, 2006, issued by the Directorate of Taxes of Norway; and that based on the Certification issued by the Securities and Exchange Commission dated September 5, 1996, Det Norske is licensed to establish a branch office in the Philippines (that is, Det Norske Philippine Branch) under SEC License No. F-1334 dated October 5, 1990, and the said branch office is located at the Ground Floor, G-5, Velco Center, corner Ocampo and Delgado Streets, Port Area, Manila, Philippines. CAcEaS It is also represented that Det Norske Philippine Branch had remitted branch profits to Det Norske for taxable years 1998 to 2004, based on the relevant copies of BIR Form Nos. 1601 and 1601-F submitted for the said taxable years; and that the amount of the branch profits and the amount of the BPRT withheld thereon are as follows: Taxable Year Branch Profits Applied for Remittance 2004 2003 2002 2000 1999 1998 PHP10,789,599.96 16,482,540.00 15,534,149.00 11,128,536.00 PHP1,618,440.00 2,472,381.00 2,330,122.35 1,669,280.40 BPRT Withheld

2,500,550.00 375,082.50 1,310,642.00 196,596.30

However, it is your opinion that the imposition of the BPRT is contrary to the provisions of paragraphs 1 and 2, Article 25 of the Philippines-Norway tax treaty, which provide: cADEIa ''Article 25 NON-DISCRIMINATION 1. Nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith, which is other or more burdensome than the taxation and connected requirements to which nationals of that other State in the same circumstances are or may be subjected. 2. The taxation on a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall not be less favourably levied in that other State than the taxation levied on enterprises of that other State carrying on the same activities. This provision shall not be construed as obliging a Contracting State to grant to residents of the other Contracting State any personal allowances, reliefs and reductions for taxation purposes on account of civil status or family responsibilities which it grants to its own residents." You assert that under the domestic tax laws of the Philippines, no withholding tax is imposed on the remittance of the after-tax profits of a branch of a domestic corporation in the Philippines to its head office in the Philippines, and that applying the principles of non-discrimination in the tax treaty, no BPRT should likewise be imposed on the remittance of the after-tax profits of a branch of a Norwegian corporation in the Philippines to its head office in Norway. Otherwise stated, it is your opinion that with the BPRT imposed on the remittance of branch profits by a local branch of a Norwegian corporation to its head office in Norway, the tax treatment on such local branch is more burdensome (or less favorable) than the tax treatment on the local branch of a domestic corporation whose remittance of profits is not subject to the BPRT. Thus, it is your position that branch profits being remitted by Det Norske Philippine Branch to Det Norske in Norway should be exempt from the 15 percent BPRT. AIDSTE Ruling In reply please be informed as follows. A. History of the BPRT

To trace back its history, the (first) National Internal Revenue Code (Tax Code) of 1939 4 did not contain a provision on the BPRT. The BPRT was introduced only in 1975 under Presidential Decree No. 778 5 as an amendment to the Tax Code of 1939. Section 1 of Presidential Decree No. 778 provides: "SECTION 1. Section 24 of the National Internal Revenue Code is hereby amended to read as follows: 'Sec. 24. xxx (b) xxx Rates of tax on corporations. xxx xxx

Tax on foreign corporations. xxx xxx

(2) Resident corporations. A corporation organized, authorized, or existing under the laws of any foreign country, engaged in trade or business within the Philippines, shall be taxable as provided in subsection (a) of this section upon the total net income received in the preceding taxable year from all sources within the Philippines: . . . Provided, further, That any profit remitted abroad by a branch office to its mother company shall be subject to tax of twenty per cent (except those registered with the Export Processing Zone Authority).'" Under the National Internal Revenue Code of 1977, 6 the rate of the BPRT was reduced to 15 percent for branch profits in general and 7 1/2 percent for branch profits relating to petroleum operations in the Philippines; branch profits relating to activities registered with the Export Processing Zone Authority (EPZA) continued to be exempt from the BPRT. Section 25 of the Tax Code of 1977 provides: ISDCHA "SECTION 25. Rates of tax on foreign corporation. (a) xxx Tax on resident foreign corporations xxx xxx

(5) Tax on branch profits remittances. Any profit remitted by a branch to its head office shall be subject to a tax of 15% (except those registered with the Export Processing Zone Authority): Provided, That any profit remitted by a branch to its head office authorized to engage in petroleum operations in the Philippines shall be subject to tax at 7 1/2%. In both cases, the tax shall be collected and paid in the same manner as provided in Sections 51 and 52 of this Code: and Provided, further, That interests, dividends, rents, royalties, including remuneration, for technical services, salaries, wages, premiums, annuities, emoluments or other fixed or determinable annual, periodical or casual gains, profits, income and capital gains received by a foreign corporation during each taxable year from all sources within the Philippines shall not be considered as branch profits unless the same are effectively connected with the conduct of its trade or business in the Philippines." The same provision of the BPRT in the Tax Code of 1977 was retained in the National Internal Revenue Code of 1993. CTHDcE Under the National Internal Revenue Code of 1997, 7 the rate of the BPRT is simplified to 15 percent and branch profits relating to activities registered with the Philippine Economic Zone Authority 8 are exempt from the BPRT. Section 28 (A) (5) of the Tax Code of 1997 provides: "SEC. 28. (A) xxx Rates of Income Tax on Foreign Corporations.

Tax on Resident Foreign Corporations. xxx xxx

(5) Tax on Branch Profits Remittances. Any profit remitted by a branch to its head office shall be subject to a tax of fifteen percent (15%) which shall be based on the total profits applied or earmarked for remittance without any deduction for the tax component thereof (except those activities which are registered with the Philippine Economic Zone Authority). The tax shall be collected and paid in the same manner as provided in Sections 57 and 58 of this Code: Provided, That interests, dividends, rents, royalties, including remuneration for technical services, salaries, wages, premiums, annuities, emoluments or other fixed or determinable annual, periodic or casual gains, profits, income and capital gains received by a foreign corporation during each taxable year

from all sources within the Philippines shall not be treated as branch profits unless the same are effectively connected with the conduct of its trade or business in the Philippines." The same provision of the BPRT in Section 28 (A) (5) of the Tax Code of 1997 has been retained even with the passage of Republic Act No. 9337, 9 which amended certain sections of the Tax Code of 1997 including Section 28. aECSHI B. Purpose of the BPRT

Former Commissioner of Internal Revenue Efren I. Plana 10 made the following remarks on why the BPRT was introduced: "Before, Philippine branches of foreign corporations were subject only to the normal corporate income tax of 25%-35%. The remittance of profit realized by the branch from Philippine sources was not subject to income tax. On the other hand, Philippine subsidiaries of non-resident foreign corporations are subject to the corporate income tax on their net taxable income and their dividend declaration to the parent company is subject to a withholding tax. Taxwise, there used to be a decided advantage in favor of local branches of foreign corporations because they were liable to only one layer of income taxation, that is, when income is realized in the Philippines. On the other hand, the net income of a domestic subsidiary of a foreign corporation is subject to two layers of taxation: (1) when the income is realized by the local subsidiary and (2) when the income is declared as dividends by the local subsidiary to its parent company abroad. In order to neutralize the tax situation as between a local branch of a foreign corporation and a domestic subsidiary of another foreign corporation, the 20% branch profit remittance tax was imposed. However, it was realized that under certain conditions the dividends remittance by a local subsidiary to its foreign parent corporation is subject to withholding tax of 15% as against the 20% branch profit remittance tax. This partially negates the attempt to place a branch and subsidiary on the same footing. It was therefore deemed necessary to reduce the branch profit tax from 20% to 15%." 11 According to the Commissioner, the reason why the BPRT was introduced is to put into the same or similar footing the tax treatment of foreign corporations engaged in trade or business in the Philippines through local branches with foreign corporations not engaged in trade or business in the Philippines but maintaining ownership in domestic corporations in the Philippines (subsidiaries). Without the BPRT, the first type of foreign corporations might have an undue advantage over the second type of foreign corporations because dividends remitted to the latter corporations by their subsidiaries would be subjected to a second layer of income taxation even if the profits of the subsidiaries out of which the dividends were paid were already subjected to a first layer of income taxation (corporate income tax). Thus the BPRT was introduced. STIcaE Further, the Commissioner noted that the rate of the BPRT was then reduced from 20 percent to 15 percent by reason that dividends paid by a domestic subsidiary to a foreign corporation not engaged in trade or business in the Philippines could, under certain conditions, be subject to a lower income tax rate of 15 percent instead of the regular 35 percent imposed on such foreign corporation. The 15 percent income tax on dividends would apply if the country of domicile of the foreign corporation would allow that corporation a tax deemed paid credit equivalent to (or at the minimum of) 20 percent, which is the difference between the regular corporate income tax of 35 percent and the 15 percent lower income tax on dividends. This tax deemed paid credit would correspond to the amount or percentage of the corporate income tax imposed on the taxable profits of the domestic subsidiary out of which the dividends are paid. 12 C. The BPRT is permitted under the Philippines-Norway tax treaty

Despite it being an additional income tax, it is noteworthy that the Philippines-Norway tax treaty recognizes the BPRT and gives way to its imposition, as Article 10 (Dividends), paragraph 7 thereof, provides: TSIEAD "7. Nothing in this Convention shall be construed as preventing a Contracting State from imposing in accordance with its internal law, a tax apart from the corporate income tax on remittances of profits by a branch to its head office provided that the tax so imposed shall not exceed fifteen per cent of the amount remitted." According to paragraph 7, branch profits remitted by a branch office of a Norwegian corporation in the Philippines to its head office in Norway may be subject to an additional tax like the BPRT at a rate not to exceed 15 of the amount remitted. D. The BPRT in relation to Article 25 of the tax treaty

On the other hand, assuming that a provision on the BPRT is lacking in the Philippines-Norway tax treaty (like in case of the Philippines-United Kingdom tax treaty), 13 the question arises if paragraphs 1 and 2, Article 25 of the Philippines-Norway tax treaty, as you invoked, would suffice to justify the non-imposition of this tax. Paragraphs 1 and 2 provide: "1. Nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith, which is other or more burdensome than the taxation and connected requirements to which nationals of that other State in the same circumstances are or may be subjected." (emphasis supplied) "2. The taxation on a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall not be less favourably levied in that other State than the taxation levied on enterprises of that other State carrying on the same activities. This provision shall not be construed as obliging a Contracting State to grant to residents of the other Contracting State any personal allowances, reliefs and reductions for taxation purposes on account of civil status or family responsibilities which it grants to its own residents." To answer this question, we examine the pertinent commentaries of the Organisation for Economic Co-operation and Development (OECD) Model Tax Convention on Income and on Capital (Condensed Version, July 2005 Edition). ECaSIT On paragraph 1, the OECD Model Convention states: "1. This paragraph establishes the principle that for purposes of taxation discrimination on the grounds of nationality is forbidden, and that subject to reciprocity, the nationals of a Contracting State may not be less favourably treated in the other Contracting State than nationals of the latter State in the same circumstances. xxx xxx xxx

3. The expression 'in the same circumstances' refers to taxpayers (individuals, legal persons, partnerships and associations) placed from the point of view of the application of the ordinary taxation laws and regulations, in substantially similar circumstances both in law and in fact. The expression 'in particular with respect to residence' makes clear that the residence of the taxpayer is one of the factors that are relevant in determining whether taxpayers are placed in similar circumstances. The expression 'in the same circumstances' would be sufficient by itself to establish that a taxpayer who is a resident of a Contracting State and one who is not a resident of that State are not in the same circumstances . . ." 14 (emphasis supplied)

Paragraph 1, Article 25 of the Philippines-Norway tax treaty provides that nationals of Norway shall not be subjected in the Philippines to any taxation, or any requirement connected therewith, which is other or more burdensome than the taxation and connected requirements to which nationals of the Philippines in the same circumstances are or may be subjected. According to the OECD Model Convention, with the phrase "in the same circumstances" in paragraph 1, the scope of this paragraph would be limited to residents of the Philippines only. The term "resident" is defined in paragraph 1, Article 4 (Resident) of the Philippines-Norway tax treaty below: DTSaHI "1. For the purposes of this Convention, the term 'resident of a Contracting State' means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature. But this term does not include any person who is liable to tax in that State in respect only of income from sources in that State or capital situated therein." Under this definition, Det Norske is a resident of the State where it is liable to tax by reason of its domicile, residence, place of management, or any other similar criterion of a similar nature. By the fact that Det Norske is organized and existing under the laws of Norway, that its head office is in Norway, and that it is issued a certificate of residence by the Norwegian Directorate of Taxes of Norway, it follows that Det Norske's domicile, residence, or place of management is in Norway and as such is a resident of Norway for purposes of the Philippines-Norway tax treaty. While Det Norske is licensed by the Securities and Exchange Commission to establish a branch office in the Philippines (that is, Det Norske Philippine Branch), this alone will not suffice to say that Det Norske's domicile, residence, or place of management is also in the Philippines thereby not making Det Norske a resident of the Philippines for purposes of the tax treaty. Relative thereto, paragraph 1, Article 25 of the Philippines-Norway tax treaty does not provide a legal basis for the nonimposition of the BPRT. IHcSCA On paragraph 2, the OECD Model Convention states: "19. Strictly speaking, the type of discrimination which this paragraph is designed to end is discrimination based not on nationality but on the actual situs of an enterprise. It therefore affects without distinction, and irrespective of their nationality, all residents of a Contracting State who have a permanent establishment in the other Contracting State. xxx xxx xxx

21. By the terms of the first sentence of paragraph [2], the taxation of a permanent establishment shall not be less favourably levied in the State concerned than the taxation levied on enterprises of that State carrying on the same activities. The purpose of this provision is to end all discrimination in the treatment of permanent establishments as compared with resident enterprises belonging to the same sector of activities, as regards taxes based on business activities, and especially taxes on business profits. xxx xxx xxx

23. As regards the first sentence, experience has shown that it was difficult to define clearly and completely the substance of the principle of equal treatment and this has led to wide differences of opinion with regard to the many implications of this principle. The main reason for difficulty seems to reside in the actual nature of the permanent establishment, which is not a separate legal entity but only part of an enterprise that has its head office in another State. The situation of the permanent establishment is different from that of a domestic enterprise, which constitutes a single entity all of whose activities, with their fiscal implications, can be fully brought within the purview

of the State where it has its head office. The implications of the equal treatment clause will be examined under several aspects of the levying of tax." 15 Paragraph 2 of the Philippines-Norway tax treaty provides that the taxation on a permanent establishment which an enterprise of Norway has in the Philippines shall not be less favourably levied in the Philippines than the taxation levied on enterprises of the Philippines carrying on the same activities. According to the OECD Model Convention, the purpose of paragraph 2 is to end all discrimination in the treatment of permanent establishments as compared with resident enterprises belonging to the same sector of activities, as regards taxes based on business activities, and especially taxes on business profits. However, the Convention likewise noted that the experience of the OECD member countries have shown that there was a difficulty in defining clearly and completely the substance of the principle of equal treatment envisaged in paragraph 2, which has led to wide differences of opinion with regard to the many implications of this principle. The main reason for the difficulty seems to reside in the actual nature of the permanent establishment, which is not a separate legal entity but only part of an enterprise that has its head office in another State. The situation of the permanent establishment is different from that of a domestic enterprise, which constitutes a single entity all of whose activities, including its fiscal affairs, can be fully brought within the purview of the State where it has its head office. The implications of the equal treatment clause will be examined under several aspects of the levying of tax. cTCEIS The United States of America, being an OECD member country, interprets the phrase "less favourably levied" in relation to the taxation of a permanent establishment in the following manner, as contained in the Income Tax Treaties of the United States 16 where it is explained: "Less favorably levied. The standard of 'less favorably levied', on its face, differs from the standard 'other or more burdensome' that in certain treaties is used in the nationality provision [in paragraph 1 of Article 25] and the foreign-controlled enterprise provision [in paragraph 5 of Article 25], including the 1981 U.S. Model Treaty. The permanent establishment provision clearly does not prevent the imposition of different ('other') taxes on a permanent establishment than those imposed on a domestic business, as long as the taxes in the aggregate on the permanent establishment are not greater than those on the domestic business. In effect, the focus is on the result of the taxation, irrespective of the method." Consistent with the foregoing, this Office is of the opinion and so holds that, as far as the Philippines is concerned, as long as the aggregate taxes imposed by the Philippines on a permanent establishment of a foreign enterprise in the Philippines are not greater than the taxes imposed by the Philippines on a domestic enterprise, it cannot be said that the permanent establishment is treated less favorably in the Philippines than the domestic enterprise. Thus, the BPRT, the corporate income tax on taxable profits, the withholding tax on certain types of income, and other similar taxes on income, can be imposed by the Philippines on a permanent establishment without going against the principle of equal treatment envisaged in paragraph 2, Article 25 of the Philippines-Norway tax treaty provided that the aggregate taxes levied on the permanent establishment are not greater than the taxes levied on a domestic enterprise. DCIAST E. Taxation of permanent establishments in the form of a branch and taxation of domestic enterprises In most cases, and in relation to Philippines tax treaties and the Tax Code of 1997, a foreign enterprise is considered to have a permanent establishment in the Philippines when it is engaged in trade or business in the Philippines through a branch or branches. For this type of permanent establishment, a foreign enterprise (like Det Norske) is registered with and licensed by the Securities and Exchange Commission to establish a branch office and engage in trade or business in the Philippines.

In terms of tax liability alone, a foreign enterprise, whether or not engaged in trade or business in the Philippines, is in a more advantageous position as compared to a domestic enterprise because it is taxable only on income derived from sources within the Philippines. A domestic enterprise is, on the other hand, taxable on income derived from sources within and without the Philippines. Section 23 (E) and (F) of the Tax Code of 1997 provides: "SEC. 23. General Principles of Income Taxation in the Philippines. Except when otherwise provided in this Code: xxx xxx xxx

(E) A domestic corporation is taxable on all income derived from sources within and without the Philippines." (F) A foreign corporation, whether engaged or not in trade or business in the Philippines, is taxable only on income derived from sources within the Philippines." Also, in terms of rate and structure of tax, there are preferential tax regimes that are or can be enjoyed only by foreign enterprises engaged in trade or business in the Philippines and which are not available to domestic enterprises. Under Section 28 (A) of the Tax Code of 1997, as amended by Republic Act No. 9337, these preferential tax regimes are: TIDcEH 1. International carriers (shipping and air transport) doing business in the Philippines are subject to 2 1/2 percent income tax on their Gross Philippine Billings. 17 2. Offshore banking units authorized by the Bangko Sentral ng Pilipinas (BSP) are exempt from income tax on income derived from nonresidents, other offshore banking units, local commercial banks, and branches of foreign banks authorized by the BSP. 3. Regional or area headquarters are exempt from income tax. A regional or area headquarters means a branch established in the Philippines by multinational companies, which does not earn or derive income from the Philippines, and which act as supervisory, communications and coordinating center for their affiliates, subsidiaries, or branches in the Asia-Pacific Region and other foreign markets. 18 4. Regional operating headquarters are subject to 10% income tax on their taxable income. A regional operating headquarters means a branch established in the Philippines by multinational companies which are engaged in any of the following services: general administration and planning; business planning and coordination; sourcing and procurement of raw materials and components; corporate finance advisory services; marketing control and sales promotion; training and personnel management; logistics services; research and development services; and product development; technical support and maintenance; data processing and communications; and business development. 19 Further, in terms of rate and structure of tax, a foreign enterprise engaged in trade or business in the Philippines are subject to the same taxes, under the same conditions as domestic enterprises, under Sections 27 and Section 28 (A) of the Tax Code of 1997, as amended by Republic Act No. 9337, as follows: THIcCA 1. Both are subject to corporate income tax of 35 percent of their taxable income, to be reduced to 30 percent beginning January 1, 2009. The term taxable income means the pertinent items of income specified in the Tax Code, less the deductions for such types of income under the Tax Code or other special laws. 20

2. Both have the option to be taxed at 15 percent of their gross income beginning January 1, 2000, provided the following conditions are satisfied: a. b. c. d. A tax effort ratio of 20 percent of Gross National Product (GNP); A ratio of 40 percent of income tax collection to total tax revenues; A VAT tax effort of 4 percent of GNP; and A 0.9 percent ratio of the Consolidated Public Sector Financial Position (CPSFP) to GNP.

3. Both have the option to be taxed at the minimum corporate income tax of 2 percent of their gross income beginning on the fourth taxable year immediately following the year in which the enterprise commenced its business operations and after satisfying certain other conditions. 4. Both are exempt from income tax on dividends derived from another domestic enterprise.

5. Both are subject to 20 percent income tax on interest from any currency bank deposit and yield or any other monetary benefit from deposit substitutes and from trust funds and similar arrangements, and on royalties, and to 7 1/2 percent income tax on income from a depository bank under the expanded foreign currency deposit system. 6. When the enterprise (foreign or domestic) is a depository bank, it is exempt from income tax on income derived under the expanded foreign currency deposit system from foreign currency transactions with nonresidents, offshore banking units in the Philippines, local commercial banks, and branches of foreign banks authorized by the BSP to transact business with foreign currency deposit system units and other depository banks under the expanded foreign currency deposit system. 7. Both are subject to 10 percent income tax on interest income from foreign currency loans granted by depository banks under the expanded foreign currency deposit system. 8. Both are subject to income tax on capital gains from the sale of shares of stock not traded in the stock exchange in the following manner: (a) for capital gains amounting to PHP100,000.00 or below, the tax is 5 percent, and (b) for capital gains in excess of PHP100,000.00, the tax is 10 percent. In fine, this Office is of the opinion and so holds that: TaDAHE

1. The Philippines-Norway tax treaty recognizes the BPRT and gives way to its imposition as paragraph 7, Article 10 of the tax treaty provides that branch profits remitted by a branch office of a Norwegian corporation in the Philippines to its head office in Norway may be subject to an additional tax like the BPRT at a rate not to exceed 15 percent. 2. Paragraph 1, Article 25 of the Philippines-Norway tax treaty does not provide a legal basis for the non-imposition of the BPRT. The principle of equal treatment intended by this paragraph is limited to nationals of the Philippines and of Norway who are both residents of the Philippines. While Det Norske is a national of Norway, it is not, however, a resident of the Philippines under paragraph 1, Article 4 of the tax treaty. 3. Paragraph 2, Article 25 of the Philippines-Norway tax treaty lays down a principle of equal treatment between a permanent establishment of a Norwegian enterprise in the Philippines and a domestic enterprise. Similar with the United States, the Philippines is of the view that as long as

the aggregate taxes imposed by the Philippines on a permanent establishment are not greater than the taxes imposed by the Philippines on a domestic enterprise, it cannot be considered that the permanent establishment is treated less favorably in the Philippines than the domestic enterprise. In this connection, while the BPRT is imposed only on permanent establishments and not on domestic enterprises, the burden of this tax upon a permanent establishment is, however, mitigated by the current tax regimes which greatly favor the permanent establishment over the domestic enterprise. In view of the foregoing, your request for confirmation that the branch profits remitted by Det Norske Philippine Branch (the branch office of Det Norske in the Philippines) to Det Norske (the Norwegian corporation) is exempt from the 15 percent BPRT is hereby DENIED for lack of legal basis. DaAIHC

Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Commissioner of Internal Revenue Footnotes 1. Received by this Bureau on October 25, 2006. 2. Originally, Det Norske Veritas Classification A/S. 3. Signed on July 9, 1987, and effective January 1, 1998. 4. Commonwealth Act No. 466 (An Act to Revise, Amend and Codify the Internal Revenue Laws of the Philippines), effective July 1, 1939. 5. Formally known as Amending Certain Sections of the National Internal Revenue Code, As Amended, effective August 24, 1975. 6. Presidential Decree No. 1158 (A Decree to Consolidate and Codify All the Internal Revenue Laws of the Philippines), effective on June 3, 1977. 7. Republic Act No. 8424 (An Act Amending the National Internal Revenue Code, As Amended, and for Other Purposes) or The Tax Reform Act of 1997, effective on January 1, 1998. 8. Under Republic Act No. 7916 (An Act Providing for the Legal Framework and Mechanism for the Creation, Operation, Administration, and Coordination of Special Economic Zones in the Philippines, Creating for this Purpose, the Philippine Economic Zone Authority (PEZA), and for Other Purposes) dated February 24, 1995, which superseded Presidential Decree No. 66 (Creating the Export Processing Zone Authority and Revising Republic Act No. 5490) dated November 20, 1972, enterprises registered with the then EPZA under Presidential Decree No. 66 automatically came under the administration of PEZA under Republic Act No. 7916. 9. An Act Amending Sections 27, 28, 34, 106, 107, 108, 109, 110, 111, 112, 113, 114, 116, 117, 119, 121, 148, 151, 151, * 236, 237 and 288 of the National Internal Revenue Code of 1997, As Amended, and for Other Purposes, effective on November 1, 2005. 10. Commissioner of Internal Revenue: September 26, 1975 to April 30, 1980. 11. See The National Internal Revenue Code of the Philippines Annotated, 1993 16th and Revised Edition, By Jose N. Nolledo and Mercedita Santiago-Nolledo. Pages 160-161. 12. See Commissioner of Internal Revenue vs. Procter and Gamble Philippine Manufacturing Corporation and the Court of Tax Appeals (G.R. No. 66838 dated December 2, 1991). 13. Convention between the Government of the Republic of the Philippines and the Government of the United Kingdom of Great Britain and Northern Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital Gains, which was signed on June 10, 1976, and effective January 1, 1979. 14. Page 284. 15. Pages 287-288. 16. By Peter H. Blessing, Copyright 1996. Chapter 20, Pages 27-28.

17. See Section 28 (A) (3), Tax Code of 1997, as amended by Republic Act No. 9337, for the definition of Gross Philippine Billings. 18. Section 22 (DD), Tax Code of 1997. 19. Section 22 (EE), Ibid. 20. Section 31, Ibid.