Apportionment and Disposition of Internal-Revenue Taxes Collected in the Philippine Islands from July 1, 1912

January 26, 2006 DA ITAD BIR RULING NO. 007-06 Philippines-Netherlands tax treaty; BIR Ruling No. DA-ITAD 028-99; BIR Ruling No. DA-ITAD 126-04 Romulo Mabanta Buenaventura Sayoc & De Los Angeles 30th Floor, Citibank Tower 8741 Paseo de Roxas, City of Makati Philippines Attention: Atty. Priscilla B. Valer Gentlemen : This refers to your application for tax treaty relief dated October 27, 2005, on behalf of your client, Maddison Square Holding B.V. (Maddison), requesting confirmation of your opinion that the dividends payable by Reckitt Benckiser (Philippines), Inc. (RBPI) to Maddison are subject to the preferential tax rate of 10% pursuant to Article 10(2)(a) of the Philippines-Netherlands tax treaty. It is represented that Maddison, a nonresident foreign corporation with address at De Fruittuinen 2-12, 2132NZ Hoofddorp and with Tax Identification Number 8079.05.781, is a resident of the Netherlands within the meaning of Article 4 of the Philippines-Netherlands tax treaty as certified by The Inspector of the Tax Administration, Amsterdam, Netherlands on September 13, 2005; that it is not registered either as a corporation or as a partnership in the Philippines per certification dated May 20, 2005 issued by the Securities and Exchange Commission; that RBPI is a corporation organized and existing under the laws of the Philippines, with office address at Unit 2601, 26/F, The Orient Square Building, Emerald Avenue, Ortigas Center, Pasig City, Philippines; that Maddison holds Eight Thousand One Hundred Seventy Six (8,176) shares or a total of Twenty Million Four Hundred Forty Thousand Pesos (Php20,440,000.00) which constitutes 99.9% of the total stockholdings of RBPI as evidenced by the Corporate Secretary's Certification dated October 26, 2005; and that at a special meeting held on April 22, 2005, it was resolved by the Board of Directors of RBPI that the company which has an accumulated unrestricted earnings amounting to Forty One Million Eight Hundred Ninety Thousand Six Hundred Ninety Eight Pesos (Php41,890,698.00), which is around 204.82% of its capital stock of Twenty Million Four Hundred Fifty Two Thousand Five Hundred Pesos (Php20,452,500.00) needs to declare and pay dividends to its stockholders to avoid penalties due to improperly accumulated earnings and upon the recommendation of the Comptroller: and that in the same meeting, said Board of Directors approved the declaration and payment of dividends in the amount of Forty One Million Eight Hundred Eighty Six Thousand Seven Hundred Twenty Pesos (Php41,886,720.00) to the stockholder of record as of March 31, 2005 namely, Maddison at Five Thousand One Hundred Twenty Pesos (Php5,120.00) per share. IEaCDH In reply, please be informed that Article 10 of the Philippines-Netherlands tax treaty provides as follows, viz: "Article 10 DIVIDENDS 1. Dividends paid by a company which is a resident of one of the States to a resident of the other State may be taxed in that other State. 2. However, such dividends may also be taxed in the State of which the company paying the dividends is a resident and according to the laws of that State, but if the recipient is the beneficial owner of the dividends the tax so charged shall not exceed: a) 10 per cent of the gross amount of the dividends if the recipient is a company the capital of which is wholly or partly divided into shares and which holds directly at least 10 per cent of the capital of the company paying the dividends; b) 15 percent of the gross amount of the dividends in all other cases. xxx xxx xxx 4. The term 'dividends' as used in this Article means income from shares, 'jouissance' shares or 'jouissance' rights, mining shares, founders' shares or other rights participating in profits, as well as income from debt-claims participating in profits and income from other corporate rights which is subjected to the same taxation treatment as income from shares by the taxation law of the State of which the company making that distribution is a resident. xxx xxx xxx" Based on the above-cited provisions, the 10 percent preferential tax rate on dividends apply whenever the beneficial owner/recipient of the dividend owns at least 10 percent of the capital of the paying company. In all other cases, the 15 percent preferential tax rate applies. Such being the case and considering that Maddison directly holds and owns 99.9% percent of the capital of RBPI, this Office is of the opinion and so holds that the dividend payments by RBPI to Maddison shall be subject to the preferential tax rate of 10 percent, based on the gross amount of dividends, pursuant to Article 10(2)(a) of the Philippines-Netherlands tax treaty. ( BIR Ruling No. DA ITAD 126-04 dated November 9, 2004; BIR Ruling No. DA-ITAD 028-99 dated October 7, 1999 ) CSAaDE 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, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service