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Da Itad Bir Ruling No. 017-07
Da Itad Bir Ruling No. 017-07
Quisumbing Torres
12th Floor, Net One Center
26th Street corner 3rd Avenue
Crescent Park West
Bonifacio Global City
Taguig, Metro Manila
Gentlemen :
This refers to your letters dated January 5 and November 18, 2005
requesting for a reconsideration of BIR Ruling No. DA-ITAD 153-04 dated
December 20, 2004 issued to Autodesk Asia Pte., Ltd. (Autodesk Asia) where
we ruled that software payments made to Autodesk Asia by CIM Technologies,
Inc. (CIM Technologies) are royalties and subject to twenty-five percent (25%)
income tax based on the gross amount thereof pursuant to Article 12 (Royalties)
of the Convention between the Republic of the Philippines and the Republic of
Singapore for the Avoidance of Double Taxation and the Prevention of Fiscal
Evasion with Respect to Taxes on Income (Philippines-Singapore tax treaty).
Background:
It is represented that Autodesk Asia is a corporation organized and
existing under the laws of Singapore, with registered office at 391B Orchard
Road, No. 12-06 Ngee Ann City Tower B, Singapore 238874, as confirmed by
its Certificate of Residence dated May 3, 2004 issued by the Inland Revenue
Authority of Singapore, its Memorandum and Articles of Association, and its
profile downloaded from the website called BizNet on May 31, 2004;
that Autodesk Asia is licensed by the Securities and Exchange Commission
(Commission) to establish a representative office in the Philippines and that as
of March 30, 2004, Autodesk Asia has not yet filed a petition for cancellation or
withdrawal of such license with the Commission, as confirmed by the Certificate
of Corporate Filing/Information dated March 30, 2004 issued by the
Commission; that the objects for which Autodesk Asia is established are,
among others, (1) to carry on the business of consultants and advisors in
connection with computers, computer equipment and machinery, both
hardware and software, computer related products and peripheral equipment
in connection thereto, and (2) to provide information and services including
maintenance, repair, programming, installation, designs, systems, data
centres, software development and research analysis to its parent
company, 1 to firms and corporations engaged in business with the parent
company, and to computer users generally; that, on the other hand, CIM
Technologies is a corporation organized and existing under the laws of the
Philippines, with principal office at LG 103, Peninsula Court Building, 8735
Paseo de Roxas corner Makati Avenue, Makati City, Philippines.
It is further represented that on February 1, 2004, Autodesk
Asia and CIM Technologies entered into an Autodesk Authorized Distributor
Agreement (Agreement) which has an initial term of effectivity of one (1) year
from February 1, 2004 to January 31, 2005 unless terminated earlier; that under
the Agreement, Autodesk Asia appointed CIM Technologies as a non-
exclusive Autodesk Authorized Distributor for the Products 2 within the
Territory, 3 and CIM Technologies accepted such appointment; that CIM
Technologies shall, unless otherwise directed by Autodesk Asia, purchase the
Products from Autodesk Asia for distribution to the Autodesk Distribution
Channel 4 within the Territory only and not to End-Users; 5 that CIM
Technologies shall not be entitled to distribute the Products to any parties other
than those permitted by Autodesk Asia, and that CIM Technologies undertakes
(1) to fulfill all orders for the Products which it receives, and (2) not to reject any
orders for the Products from, or cease to supply the Products to, any Retail
Reseller 6 or any party in the Autodesk Distribution Channel unless a prior
written consent of Autodesk Asia has been obtained; that all prices of the
Products are on Incoterms 2000 "Ex-Works" (fulfillment facility as notified
by Autodesk Asia) basis, and that the price to CIM Technologies for each of the
Products (the "Per Copy Fee") shall be as set forth in Autodesk Asia's then
prevailing price list as notified to CIM Technologies; that CIM Technologies'
profit or income from distributing the Products shall be the difference
between CIM Technologies' price of the Products charged to its customers
and CIM Technologies' Per Copy Fee charged by Autodesk Asia; that CIM
Technologies' minimum purchase commitments for the Products for the four (4)
quarters of the initial year shall be as follows:
Products Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total
(February- (May-July) (August- (November-
April) October) January)
MSD $22,000 $24,000 $30,000 $24,000 $100,000
MAP $55,000 $60,000 $75,000 $60,000 $250,000
LCS $19,800 $21,600 $27,000 $21,600 $90,000
–––––– ––––––– ––––––– ––––––– –––––––
TOTAL $96,800 $105,600 $132,000 $105,600 $440,000
===== ====== ====== ====== ======
that Autodesk Asia may modify the above figures from time to time by making
a written notice to CIM Technologies; that upon shipment of the Products
to CIM Technologies, Autodesk Asia shall submit an invoice to CIM
Technologies, which indicates therein CIM Technologies' Per Copy Fee of the
Products shipped plus any freight, taxes, insurance or other applicable costs
initially paid by Autodesk Asia but to be paid afterwards by CIM Technologies;
and that CIM Technologies shall pay Autodesk Asia the full invoiced amount in
United States dollars and within thirty (30) days from the invoice date.HIaSDc