The Bureau of Internal Revenue has confirmed that "guarantee fees" are not "interest" for the purposes of a tax treaty. In a ruling (BIR ITAD Ruling No. 122-05) dated 27 October 2005, the BIR found that guarantee fees (for loan guarantees) paid by a company registered in the Philippines to a South Korean company, did not fall within the purview of the "Interest" article of the Philippines-Korea (Rep.) tax treaty. Such fees should instead be dealt with under the "Other Income" article of the tax treaty, and since this article only provides for the taxation of other income in the state of residence of the recipient, the guarantee fees were not taxable in the Philippines.
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