February 9, 2007

DA ITAD BIR RULING NO. 017-07

Article 12 (Royalties) Philippines-

Singapore tax treaty

Quisumbing Torres
12th Floor, Net One Center
26th Street corner 3rd Avenue
Crescent Park West
Bonifacio Global City
Taguig, Metro Manila

Attention: Atty. Dennis G. Dimagiba

Atty. Jose Jaime V. Cruz

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

It is also represented that on February 1, 2005, Autodesk Asia made a

written notice to CIM Technologies informing the latter that Autodesk Asia has
renewed the Agreement for another term of one (1) year from February 1, 2005
to January 31, 2006 unless terminated earlier, upon the same terms and
conditions in the original Agreement, with few modifications relating to taxes,
stock rotation, upgrades and crossgrades, sales records, survival of certain
terms, and intellectual property rights.
Request for Reconsideration:
In view of the foregoing, you seek reconsideration and argue that instead
of royalties, payments to be made by CIM Technologies to Autodesk
Asia under the Autodesk Authorized Distributor Agreement should be
characterized as business profits and taxed accordingly under the articles on
permanent establishment and business profits of the Philippines-Singapore tax
treaty.
Further, in your letter dated November 18, 2005, you requested that we
issue another ruling for Autodesk Asia in the light of the renewed Agreement
and of the pertinent Philippine tax laws, regulations and administrative
issuances in effect during the term of the renewed Agreement.
BIR Position on the Request for Reconsideration:
1. On BIR Ruling No. DA-ITAD 153-04 dated December 20, 2004
In reply, please be informed that we maintain our position in BIR Ruling
No. DA-ITAD 153-04 since Revenue Memorandum Circular (RMC) No. 77-
2003 (Classification of Payments for Software for Income Tax Purposes) was
in place at the time of the drafting and issuance of the said ruling and this RMC
mandated the observance of its provisions regarding the taxation of software
payments made on November 18, 2003 up to September 7, 2005. RMC 77-
2003 is applicable to payments made to domestic and foreign licensors and in
case of the latter, whether or not such payments can be subject to relief under
a particular tax treaty. Under this RMC, software payments are generally
characterized as royalties for taxation purposes, and this includes and treats as
royalties payments from the mere purchase of a copyrighted article embedding
a software and payments from reselling and distributing a copyrighted article
embedding a software, among others, to wit:
"Definition of Royalties Includes Payments for the Use of Software:
The term "royalties" as generally used means payment of any kind
received as a consideration for the use of, or the right to use, any
copyright of literary, artistic or scientific work including cinematograph
films, or films or tapes used for radio or television broadcasting, any
patent, trade mark, design, or model, plan, secret formula or process, or
for the use of, or the right to use, industrial, commercial or scientific
equipment, or for information concerning industrial, commercial or
scientific experience. The term "use " as contained herein shall include
the reselling or distribution of software.
Software is generally assimilated as a literary, artistic or scientific work
protected by the copyright laws of various countries including the
Philippines; thus payments in consideration for the use of, or the right to
use, a copy or a copyrighted article relating to software are generally
royalties."
Applying the provisions of RMC 77-2003 in ITAD Ruling 153-04,
payments to be made by CIM Technologies to Autodesk Asia under the
Autodesk Authorized Distributor Agreement are royalties and subject to 25%
income tax based on the gross amount thereof, under the article on royalties of
the Philippines-Singapore tax treaty.
2. On the Renewed Agreement
Payments made by CIM Technologies to Autodesk Asia under the
renewed Agreement from February 1 to September 7, 2005 are covered by the
provisions of RMC 77-2003 while payments made or to be made by CIM
Technologies to Autodesk Asia from September 8, 2005 and thereafter are
covered by the provisions of RMC 44-2005 (Taxation of Payments for
Software), which took effect on September 8, 2005. Under RMC 44-2005, which
substantially amended RMC 77-2003, software payments are treated
as royalties only if the transaction does not constitute a sale or exchange and
not all substantial rights in the software have been transferred, but are merely
for the transfer of copyright rights in the software. It provides:
"Section 5. CHARACTERIZATION OF TRANSACTIONS. — The
character of payments received in a transaction involving the transfer of
computer software depends on the nature of the rights that the
transferee acquires under the particular arrangement regarding the use
and exploitation of the program.
a. Transfer of copyright rights. A transfer of software is
classified as a transfer of a copyright right if, as a
result of the transaction, a person acquires any one
or more of the rights described below:
i. The right to make copies of the software for
purposes of distribution to the public by sale
or other transfer of ownership, or by rental,
lease or lending;
ii. The right to prepare derivative computer
programs based upon the copyrighted
software;
iii. The right to make a public performance of the
software;
iv. The right to publicly display the computer
program; or
v. any other rights of the copyright owner, the
exercise of which by another without his
authority shall constitute infringement of said
copyright.
The determination of whether a transfer of a copyright right
in a software is a sale or exchange of property is made on
the basis of whether, taking into account all facts and
circumstances, there has been a transfer of all substantial
rights in the copyright. A transaction that does not
constitute a sale or exchange because not all substantial
rights have been transferred will be classified as a license
generating royalty income.
When only copyright rights are transferred, payments
made in consideration therefor are royalties. On the other
hand, when copyright ownership is transferred, payments
made in consideration therefor are business income.
b. Transfer of copyrighted articles. A copyrighted article
incorporating a software includes a copy of the
software from which the work can be perceived,
reproduced, or otherwise communicated, either
directly or with the aid of a machine or device. The
copy of the software may be fixed in the magnetic
medium of a floppy disk or a CD-ROM, or in the
main memory or hard drive of a computer, or in any
other medium.
If a person acquires a copy of a software but does not
acquire any of the rights described above (or only
 acquires a de minimis grant of such rights), and the
transaction does not involve the provision of
services or of know-how, the transfer of the copy of
the software is classified solely as a transfer of a
copyrighted article and payments for which
constitute business income.
xxx xxx xxx"
Other than as royalties, this RMC treats software payments as business
income, rental income, or capital gains, depending on the nature of the
transaction out of which such payments are made.
A significant difference between the two RMCs lies in the characterization
of payments made for the purchase of a copyrighted article incorporating a
software where an end-user is merely granted access and use of the software
for its own internal data processing requirements and not any of the copyright
rights in the software as described above. While RMC 77-2003 would treat
payments made by an end-user as royalties, RMC 44-2005, on the other hand,
would treat such payments as business income (or business profits for tax
treaty purposes). Furthermore, software payments will constitute
as royalties under RMC 44-2005 if the licensor grants access and use of any of
the copyright rights in the software exclusively or with limitations to the
particular person.
On the question of whether RMC 44-2005 continues to characterize
payments to be made by CIM Technologies to Autodesk Asia under the
Autodesk Authorized Distributor Agreement as royalties, please be informed
that when only copyright rights are transferred in a transaction involving
software, payments made in consideration therefor are royalties. A transfer of
software is classified as a transfer of a copyright right if, as a result of the
transaction, a person acquires any one or more of the following rights:
1. The right to make copies of the software for purposes of
distribution to the public by sale or other transfer of ownership,
or by rental, lease or lending;
2. The right to prepare derivative computer programs based upon
the copyrighted software;
3. The right to make a public performance of the software;
4. The right to publicly display the computer program; or
5. Any other rights of the copyright owner, the exercise of which by
another without his authority shall constitute infringement of
said copyright. AScTaD
 Based on the facts as represented, it is understood that under the
Autodesk Authorized Distributor Agreement, Autodesk Asia will ship the
Products to CIM Technologies who will in turn distribute the Products to the
parties in the Autodesk Distribution Channel and to Retail Resellers. CIM
Technologies has a minimum purchase commitment for the Products for each
quarter of the term of the Agreement. Upon shipment of the Products, Autodesk
Asia shall submit an invoice to CIM Technologies, which will indicate
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 which shall be paid afterwards by CIM Technologies. The Per Copy
Fee for the Products paid by CIM Technologies is the basis for
computing Autodesk Asia's income from the transaction.
An analysis of this business arrangement cannot be considered as a
grant by Autodesk Asia to CIM Technologies of a copyright right as described
in Items 1, 2, 3 and 4 above. In relation to Item 1, CIM Technologies is granted
by Autodesk Asia the right to distribute the Products in public but not to
reproduce them. CIM Technologies will acquire the Products by ordering them
from Autodesk Asia and not from reproducing them in its own premises or
assigning another person to reproduce the Products for its (CIM Technologies)
own benefit before distributing the Products. In relation to Items 2, 3 and 4, CIM
Technologies is also not granted the right to prepare derivative computer
programs based upon the software embedded in the Products, to make a public
performance of the software, nor to publicly display the software.
However, in relation to Item 5, the grant by Autodesk Asia to CIM
Technologies of the right to distribute the Products in public but not to
reproduce them shall be classified as a transfer of a copyright right if the
acquisition and exercise of such right without the authority of Autodesk
Asia constitutes an infringement of such copyright. In order to determine if such
right can be the subject of infringement, Section 177 of the Intellectual Property
Code of 1998 (Republic Act No. 8293) enumerates those rights of an author or
owner of a literary, artistic or scientific work like software which can be the
subject of infringement. It provides:
"Section 177. Copyright or Economic Rights. — Subject to the provisions
of Chapter VIII, copyright or economic rights shall consist of the exclusive
right to carry out, authorise or prevent the following acts:
177.1. Reproduction of the work or substantial portion of the work;
177.2. Dramatization, translation, adaptation, abridgment, arrangement or
other transformation of the work;
177.3. The first public distribution of the original and each copy of the work
by sale or other forms of transfer of ownership;
 177.4. Rental of the original or a copy of an audiovisual or
cinematographic work, a work embodied in a sound recording, a computer
program, a compilation of data and other materials or a musical work in
graphic form, irrespective of the ownership of the original or the copy
which is the subject of the rental;
177.5. Public display of the original or a copy of the work; and
177.6. Other communication to the public of the work." (emphasis
supplied)
It is noteworthy that Section 177.3 includes as one of the copyright or
economic rights of the author or owner of a work the right to make a first public
distribution of the original and each copy of the work by sale or other forms of
transfer of ownership. A simple interpretation of Section 177.3 would mean that
the grant by the author or owner of a work to another person of` the right to
distribute the work in public even without the right to reproduce the work
constitutes a transfer of a copyright right because the other person acquires a
right the exercise of which by him without the authority of the author or owner
constitutes infringement, as emphasized by the phrase the "exclusive right to
carry out, authorise or prevent the act (of distributing the work)". Applying this
to the case at hand, the grant by Autodesk Asia to CIM Technologies of the
right to distribute the Products in public to the parties in the Autodesk
Distribution Channel and to Retail Resellers constitutes a transfer of a copyright
right whereby CIM Technologies acquires a right the exercise of which by CIM
Technologies, without Autodesk Asia's authority, constitutes infringement of
such right of Autodesk Asia.
In fact, this right granted to CIM Technologies is even subject to further
limitations by reason, for example, that CIM Technologies can distribute the
Products to the parties in the Autodesk Distribution Channel and to Retail
Resellers only but not to End-Users, and that CIM Technologies should fulfill all
orders for the Products which it receives, and cannot reject any orders for the
Products from, or cease to supply the Products to, any Retail Reseller or any
party in the Autodesk Distribution Channel unless the prior written consent
of Autodesk Asia has been obtained. Taking a step further, if Autodesk
Asia also imposes these limitations to the parties in the Autodesk Distribution
Channel and to Retail Resellers who in turn distribute the Products to End-
Users, such an arrangement also constitutes a transfer of a copyright right
whereby the parties in the Autodesk Distribution Channel and the Retail
Resellers acquire a right the exercise of which by them without Autodesk Asia's
authority constitutes infringement of such right of Autodesk Asia. This transfer
of a copyright right provided under Section 177.3 of the Intellectual Property
Code applies only to the distribution and reselling of a copyrighted work like
software but not to the distribution and reselling of a non-copyrighted work. By
applying a 'substance-over-form' approach, a transfer of copyright right exists
regardless of the business arrangement between the author or owner of the
copyrighted work and the distributor or reseller, that is, whether the
arrangement is a consignment arrangement where title and ownership of the
copyrighted work remains with the author or owner until the copyrighted work
is sold by the distributor or reseller to a third party, or a reselling
arrangement where title and ownership of the copyrighted work is with the
distributor or reseller of the copyrighted work and not with the author or owner
of the work until the distributor or reseller sold the work to a third party.
This is buttressed by the fact that a distributor or reseller of a copyrighted
work like software, as distinct from an end-user, cannot distribute or resell such
work unless he is permitted to do so by the author or owner of the work. Lacking
such permission, the act of distribution or reselling of the copyrighted work
constitutes an infringement of the right or rights subsisting in that work,
punishable under Section 217.3 of the Intellectual Property Code, to wit:
"Section 217. Criminal Penalties. — . . .
217.3. Any person who at the time when copyright subsists in a work
has in his possession an article which he knows, or ought to
know, to be an infringing copy of the work for the purpose of:
(a) Selling, letting for hire, or by way of trade offering or
exposing for sale, or hire, the article;
(b) Distributing the article for purpose of trade, or for any
other purpose to an extent that will prejudice the
rights of the copyright owner in the work; or
(c) Trade exhibit of the article in public, shall be guilty of
an offense and shall be liable on conviction to
imprisonment and fine as above mentioned. (Sec.
29, P.P. No. 49a)
xxx xxx xxx"
On the other hand, Sections 185 and 189 of the Intellectual Property
Code, quoted below, do not consider it an infringement when an end-user
merely makes a "fair use" of a software, nor when he copies (reproduces) the
software onto a computer or copies (reproduces) it but for archival or backup
purposes only.
"Section 185. Fair Use of a Copyrighted Work. — 185.1 The fair
use of a copyrighted work for criticism, comment, news reporting, teaching
including multiple copies for classroom use, scholarship, research, and
similar purposes is not an infringement of copyright. Decompilation, which
is understood here to be the reproduction of the code and translation of
the forms of the computer program to achieve the inter-operatibility of an
independently created computer program with other programs may also
 constitute fair use. In determining whether the use made of a work in any
particular case is fair use, the factors to be considered shall include:
(a) The purpose and character of the use, including whether such use is
of a commercial nature or is for non-profit educational purposes;
(b) The nature of the copyrighted work;
(c) The amount and substantiality of the portion used in relation to the
copyrighted work as a whole; and
(d) The effect of the use upon the potential market for or value of the
copyrighted work."
"Section 189. Reproduction of Computer Program. — 189.1.
Notwithstanding the provisions of Section 177, the reproduction in one (1)
backup copy or adaptation of a computer program shall be permitted,
without the authorization of the author of, or other owner of copyright in, a
computer program, by the lawful owner of that computer program;
Provided, That the copy or adaptation is necessary for:
(a) The use of the computer program in conjunction with a computer for
the purpose, and to the extent, for which the computer program
has been obtained; and
(b) Archival purposes, and, for the replacement of the lawfully owned
copy of the computer program in the event that the lawfully
obtained copy of the computer program is lost, destroyed or
rendered unusable.
189.2. No copy or adaptation mentioned in this Section shall be
used for any purpose other than the ones determined in this Section, and
any such copy or adaptation shall be destroyed in the event that continued
possession of the copy of the computer program ceases to be lawful.
189.3. This provision shall be without prejudice to the application
of Section 18.5 whenever appropriate."
In relation to the use of software by an end-user, it should be emphasized
that the software payments made by an end-user are now treated as business
income (or business profits for tax treaty purposes) under the new RMC 44-
2005 and no longer as royalties under the old RMC 77-2003. Under RMC 44-
2005, the rights generally acquired by the end-user to reproduce the software
onto a computer or to reproduce the software for archival or backup purposes
only is merely a de minimis right compared to other rights mentioned in Section
177 of the Intellectual Property Code. However, the grant of a right to distribute
the software cannot be considered as de minimis as in the case of the end-
user. The grant of this right to a distributor or reseller by the author or owner of
the software pertains to rights which may be subject to infringement and as
such gives rise to royalties. This is true even if payments to be made by the
distributor or reseller to the author or owner are not literally termed
as royalties but merely payments or fees in general and even if the contract
between the parties are not literally termed license contracts but merely
contracts of sale, contracts to sell, consignment contracts, etc., as those
generally used when the goods or merchandise involved are noncopyrighted
works. What is essential is that copyright rights are granted under such contract
and without which, the reseller or distributor may be regarded as infringing the
copyright owner's rights, based on the provisions of the Intellectual Property
Code.
In view of the foregoing, this Office is of the opinion and so holds that
payments to be made by CIM Technologies to Autodesk Asia under the
renewed Autodesk Authorized Distributor Agreement continues to be in the
nature of royalties and are not business profits under RMC 44-2005. These
payments (in this case, termed Per Copy fees) shall be subject to 25% income
tax based on the gross amount thereof pursuant to Article 12 (Royalties) of the
Philippines-Singapore tax treaty in relation to RMC 44-2005.
Finally, the sale of the Products by Autodesk Asia to CIM
Technologies is subject to value-added tax (VAT) under Section 106(A) of the
Tax Code, to wit:
"SEC. 106. Value-added Tax on Sale of Goods or Properties. —
(A) Rate and Base of Tax. — There shall be levied, assessed and
collected on every sale, barter or exchange of goods or
properties, a value-added tax equivalent to ten percent (10%) of
the gross selling price or gross value in money of the goods or
properties sold, bartered or exchanged, such tax to be paid by
the seller or transferror.
xxx xxx xxx" 7
The gross amount of the Per Copy Fees payable to Autodesk
Asia constitutes the gross selling price or gross value in money of the Products
on which the appropriate VAT rate (now 12%) is imposed.
With regard to the procedures for withholding and paying the VAT,
Sections 4 and 6 of Revenue Regulations No. 4-2000, Section 3 of Revenue
Regulations No. 8-2002, and Section 7 of Revenue Regulations No. 14-2002
and Section 4.114.2 of Revenue Regulations No. 16-2005, provide that CIM
Technologies shall be responsible for the withholding of the appropriate VAT
rate (now 12%) on the Per Copy Fees before remitting them to Autodesk Asia.
In remitting to the Bureau of Internal Revenue the VAT withheld on such
fees, CIM Technologies shall use BIR Form No. 1600 (Monthly Remittance
Return of VAT and Other Percentage Taxes Withheld). If a VAT-registered
taxpayer, CIM Technologies may use as documentary substantiation for its
claim of input VAT the duly filed BIR Form No. 1600 and the proof of payment
accompanying it. If a non-VAT-registered taxpayer, CIM Technologies may
include as part of the cost of the Products sold to it by Autodesk Asia the VAT
consequently shifted or passed on to it and may treat such VAT either
as expense or asset, whichever is applicable. In addition, CIM Technologies is
required to issue the Certificate of Final Tax Withheld at Source (BIR Form No.
2306) in quadruplicate, the first three copies thereof to be given to Autodesk
Asia upon its request, and the fourth copy to be retained by CIM
Technologies as its file copy.
This ruling is issued on the basis of the facts as represented. However,
if upon investigation it shall be disclosed that the facts are different, then this
ruling shall be without force and effect insofar as the herein parties are
concerned.

Very truly yours,

(SGD.) JOSE MARIO C. BUÑAG

Commissioner of Internal Revenue
Footnotes
1.Parent company shall mean Autodesk, Inc., a foreign corporation organized and
existing under the laws of the United States of America, with principal office at
111 McInnis Parkway, San Rafael, California 94903, United States of America.
2.Products shall mean (1) Non-Retail Products (AIS/AIP, MAP, MapGuide, Map
Series, Land and Civil Series) and (2) Sell-Through Products (Subscriptions,
Streamline, AIP). Non-Retail Product refers to a Product which may be sold to
the Autodesk Distribution Channel only, and Sell-Through Product refers to a
Product for which a purchase order may be placed with Autodesk Asia only
after an End-User purchase order for that Product has been received. Autodesk
Asia may modify the list of Products from time to time by making a written
notice to CIM Technologies.
3.Territory shall mean the Philippines. Autodesk Asia may modify the Territory from
time to time by making a written notice to CIM Technologies.
4.Autodesk Distribution Channel shall mean the authorized distribution channels
designated by Autodesk Asia comprising of Autodesk Systems Centers,
Autodesk Authorized Resellers, Autodesk Authorized Systems Integrators, and
such other persons in the Territory certified by Autodesk Asia to purchase
specific Products from CIM Technologies for resale to End-Users. Autodesk
Asia may modify the Autodesk Distribution Channel from time to time by
making a written notice to CIM Technologies.
5.End-User shall mean any third party which obtains the Products solely in order to
fulfill its own internal data processing needs.
6.Retail Reseller shall mean any retail outlet or reseller not forming part of the
Autodesk Distribution Channels and which purchases the Retail Products
from CIM Technologies for resale to End-Users.
7.Republic Act No. 9337 (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), which was signed into law on May 24, 2005 and became effective
on November 1, 2005, amended Section 106 (A) to read as:
"SEC. 106. Value-added Tax on Sale of Goods or Properties. —
(A) Rate and Base of Tax. — There shall be levied, assessed and collected on every
sale, barter or exchange of goods or properties, a value-added tax equivalent to
ten percent (10%) of the gross selling price or gross value in money of the
goods or properties sold, bartered or exchanged, such tax to be paid by the
seller or transferor: Provided, that the President, upon the recommendation of
the Secretary of finance, shall, effective January 1, 2006, raise the rate of
value-added tax to twelve percent (12%), after any of the following conditions
has been satisfied:
(i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of
the previous year exceeds one and one-half percent (1 1/2%); or
(ii) National government deficit as a percentage of GDP of the previous year exceeds
one and one-half percent (1 1/2%).
xxx xxx xxx"
The VAT rate was increased to 12% on February 1, 2006, in accordance with the
Memorandum of the Executive Secretary to the Secretary of Finance dated
January 31, 2006, as circularized by Revenue Memorandum Circular No. 7-
2006 (Publishing the Full Text of the Memorandum from Executive Secretary
Eduardo R. Ermita dated January 31, 2006 Approving the Recommendation of
the Secretary of Finance to Increase the Value Added Tax Rate From Ten
Percent to Twelve Percent) dated January 31, 2006.