BIR Ruling

August 4, 1968 Mr. Raul S. Roco c/o Honorable Benigno S. Aquino, Jr. Senate Manila S i r : With reference to your letter dated July 22, 1968, please be informed that the ruling of the Secretary of Finance dated September 12, 1951 to the effect that dividends paid on preferred shares are deductible from the Corporation's gross income as interest provided the four requirements enumerated in the said ruling are punctiliously complied with, still holds. For ready reference and convenience, the aforementioned requirements for deductibility of dividends are quoted hereunder as follows: "1. The holders of the preferred shares do not posses voting rights; "2. The holders of the preferred shares do not participate in the management of the affairs of the corporation; "3. The holders of the preferred shares have the right to fixed dividends or interest irrespective of whether profits or losses are made or sustained; and "4. When the preferred shares are redeemable after a certain fixed date which stamp of the holders thereof with the status of mere creditors of the corporation." iatdc Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue