BIR Ruling No. 7-2020

REPUBLICOFTHE PHILIPPINES

DEPARTMENT OF FINANCE

BUREAU OF INTERNAL REVENUE

Quezon City

23(F); 42(C)(3); 108(A) NIRC RA 7916 of 1997, as amended

BIR Ruling No. 345-2011 0T-007-2020

20th Floor, Tower 1 6766 Ayala Avenue Makati City PUNONGBAYAN & ARAULLO The Enterprise Center JAN 2 0 2023

Attention: ATTY.ELEANOR L.ROOUE

Tax Principal, Tax Advisory & Compliance

Gentlemen:

two corporations have previously executed, are not subject to income tax, withholding tax, and value added tax (VAT) in the Philippines. your opinion that the service fees paid to SIIX Corporation ("SIIX Co.") by SIIX Logistic Phils., Inc. ("SIIX Logistics") pursuant to the Service Agreement which the This refers to your letter dated January 13, 2010, requesting confirmation of

established under Philippine laws per Securities and Exchange Commission (SEC) Park, Inc., Binan, Laguna. It is also duly registered with the Philippine Export Zone Authority (PEZA") as an Ecozone Facilities Enterprise, with Certificate of Technology Avenue, Phase 4, Special Processing Economic Zone, Laguna Techno Certificate of Registration No. Registration No. It is represented that SIIX Logistics, is a corporation duly organized and dated February 28, 1997, as further amended on with business address located at 125

components, sorting and kitting them for subsequent sale to an export manufacturer, the preferential rate of 5% tax on the gross income earned from its registered September 19, 2003. It is licensed to engage in the importation of electronic parts and administered Ecozones and distribution to its overseas clients (direct export) of activities, in lieu of all taxes. distribution ofelectronic products electronic products from PEZA-registered export enterprises. As such, it is subject to to other export manufactures in PEZA-

virtue of the laws of Japan, with business address at 1-4-9, Bingo-machi, Chuo-ku, Osaka City, Japan. SIIX Co. owns 100% of SIIX Logistics. It is not registered either as a corporation or as a partnership in the Philippines, as shown in the Certification of On the other hand, SIIX Co. is a corporation duly established and existing by

CT-007-2020

SIlX Logistics Philippines, Inc. Page 2of4

Non-Registration of Company dated November 4, 2009 issued by the Securities and

Exchange Commission ("SEC).

Agreement. pursuant to which SIIX Logistics engaged the services of the latter to On 5 October 2009, SIIX Logistics and SIIX Co.entered into a Service

provide consulting services. Under Appendix 1 of the said Service Agreement, the services to be rendered by SIIX Co.are as follows:

a Legal Consulting Service - review of and advice on various business

contracts which SIIX Logistics enters into with its customers, contractors

etc.;

b) Consulting on purchase of parts/components - a.) supplying price information retrieved from SIIX Corporation's QPS quotation system, and b.) negotiating with local suppliers on behalf of SIIX Logistics for efficient

purchase of parts/components;

c) Consulting on financial, accounting and tax matters - negotiating with banking facilities on behalf of SIIX Logistics for borrowing operation fund and other assistance in solving accounting/tax issues; and

d Consulting on computer system -- providing maintenance and support in

utilizing the SIIX Integrated Business Operating System (SIBOS) and Warehousing Management System (WMS)

That pursuant to the Agreement, the abovementioned services are rendered by the employees and personnel of SIIX Co.exclusively at its headquarters in Osaka.

Japan and shall not involve any transfer of technology, know-how or other intellectual property rights. That as consideration for these services, SIIX Logistics will pay SIIX Co. service fees, the particulars of which are provided in Appendix 1 of the Service

Agreement.

Based on the forgoing representations, you now request for the confirmation of your opinion that:

a the management fees received by SIIX Co. from SIIX Logistics

pursuant to the Service Agreement entered into by the parties are not

subject to Philippine income tax and consequently, to withholding tax

pursuant to Section 23 (F of the Tax Code of 1997,in relation to Section

28Band Section 42A3of the same Code;and

b) the said management fees are also not subject to 12% value-added tax VAT based on Section 108A of the Tax Code of 1997 since all

services are performed by SIIX Co.outside the Philippines.

In reply,please be informed that under Section 23(F of the National Internal

Revenue Code of 1997Tax Code,as amended,a foreign corporation,like SIIX

income tax only with respect to income derived from sources in the Philippines, to Co.. whether or not engaged in trade or business in the Philippines, is subject to

Wit:

OT-007-2020 SIIX Logistics Philippines, Inc. Page 3 of 4 JAN 2 0 2020

"SEC.23. General Principles of Income Taxation in the Philippines. Except when otherwise provided in this Code:

xxxxxx XXX

(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. " (Emphasis ours)

actually performed in the Philippines, to wit: the Tax Code, income is considered derived in the Philippines only if the services are Concerning income from the provision of services, under Section 42(A)(3) of

"Section 42. Income from Sources Within the Philippines.

(A) Gross Income From Sources Within the Philippines. - The following items of gross income shall be treated as gross income from sources within the Philippines:

XXXXXx XxX

3) Services. Compensation.forlabor orpersonal services

performed in the Philippines; " (Emphasis ours)

SIIX Co. in Japan pursuant to the Agreement shall not be subject to income tax, SIIX Logistics is not obliged to withhold any tax on the said service fees. (BIR Ruling pursuant to Section 23(F), in relation to Section 42(A)(3), of the Tax Code, and thus, No. 345-2011 dated September 22, 2011) Accordingly, service fees paid by SIIX Logistics for the services rendered by

subject to Philippine income tax at the rate of thirty percent (30%) of the gross also be rendered outside SIIX Co's headquarters office in Osaka, Japan. Thus, any service which may be required to be performed in the Philippines under the amount thereof under Section 28(B)(1) of the 1997 Tax Code, as amended. For this purpose, SIIX Logistics must properly allocate and/or apportion those payments for services rendered within the Philippines and in Osaka, Japan, such that only the payments for services rendered in Osaka, Japan will be exempt from income tax. Agreement should be considered off-shore services only if they relate to the services performed outside the Philippines. It is noted that the subject consulting services may Agreement should be considered on-shore works, and, thus, payments therefor are It must be emphasized, however, that any performance of service under the

Finally, with respect to value-added tax (VAT), payments for the sale or

if the services are performed in the Philippines. Section 108(A) of the Tax Code, as amended, provides: exchange of services, including the use or lease of properties are subject to VAT only

"SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties. --

SIIX Logistics Philippines, Inc. Page 4 of 4 JAN 2 0 2020 T007-3020

(A) Rate and Base of Tax. -There shall be levied, assessed and collected, a properties: Provided, that the President, upon the recommendation of the Secretary of Finance, shall, effective January 1, 2006', raise the rate of value-added tax equivalent to ten percent (10%) of gross receipts derived from the sale or exchange of services, including the use or lease of value-added tax to twelve percent (12%)...

The phrase 'sale or exchange of services' means the performance of all kinds of services in the Philippines for others for a fee, remuneration or consideration...

derived by SIIX Co. for the performance of the offshore services are not subject to VAT. (BIR Ruling No. 331-2012 dated May 14, 2012) services within the Philippines are subiect to VAT. On the other hand, gross receipts Accordingly, all gross receipts derived by SIIX Co. for the performance of the

serve as documentary payment, is responsible for the withholding of the twelve percent (12%) final VAT on the payments for the services rendered within the Philippines. SIIX Logistics shall then remit the VAT withheld to (MonthlyRemittance Withheld). The duly filed BIR SIIX Logistics, being the resident withholding agent and a payor in control of substant Retur. the. B It shall use the BIR Form No. 1600 1a Tax & Other Percentage Taxes proof of payment thereof shall nput tax to be applied against

& 6, Revenue Regulations (RR) No. 4-2002 the output tax that may be di In addition, SIIX Logisti Certificate of Creditable Tax With copies for SIIX Co. and the fourth 14-2002). ; Section 3 of RR 8-2002; Section 7 of RR (BIR Form No. 2307), the first three 0 gistics as its file copy (Sections 4 if it is a VAT-registered taxpayer. in quadruplicate the relevant

However, if upon investigation, it will be disclosed that the facts represented are different, then this ruling shall be considered null and void. This ruling is being issued on the basis of the foregoing facts as represented.

Very truly yours.

1ee3an1as

Commissioner of Internal Revenue CAESAR R. DULAY

K-1 031797

Secretary t The VAT rate was increased to 12 percent beginning February 1, 2006, in accordance with the Memorandum of the Executive iothe S Secretary of Finance dated January 31, 2006, as circularized by Revenue Memorandum Circular No. 7-2006

the Recommendation of the Secretary of Finance to Increase the Value Added Tax Rate from Ten Percent to Twelve Percent) dated January 31, 2006. (Publishing the Full Text of the Memorandum from Executive Secretary Eduardo R. Ermita dated January 31,2006 Approving