BIR REVENUE MEMORANDUM CIRCULAR NO. 39-92

: It provides guidelines to implement the "most favored nation clause" in Article 13, 2(b)(iii) of the Philippines-United States Tax Treaty concerning the tax rate on royalties.
: Their claim for refund of alleged overpaid taxes on royalty income derived from the Philippines was denied as the "most favored nation" clause did not apply in their case.
: It provides that the tax imposed on royalties derived by a third state from the Philippines shall be the lowest tax rate imposed on royalties under similar circumstances.
: Because the circumstances were not similar—the Philippines-Germany treaty has a matching tax credit system which the United States does not have.
: 15% if royalties are paid by BOI-registered corporations engaged in preferred activities, and 25% in all other cases.
: No, such rulings were revoked effective January 21, 1992 pursuant to the IBM memorandum decision.
: No, retroactive application is prohibited by Section 246 of the Tax Code if it prejudices the taxpayer's interest.
: They must amend their withholding tax returns and pay the corresponding taxes by October 30, 1992, to avoid penalties.
: They will be assessed additional taxes with corresponding penalties.
: The International Tax Affairs Division is responsible for monitoring compliance and instituting verification programs.