BIR Ruling

August 11, 1977 Messrs. Francisco, De Castro & Zulueta Attorneys-at-Law Vivelya Bldg., 7248-F Malugay St. Makati, Metro Manila Attention: Atty . Renato Z . Francisco Gentlemen : This refers to your letter dated January 28, 1977 requesting confirmation that the 15% rate of withholding tax applies to the dividends to be remitted by your client,, IMS Philippines, Inc., a resident foreign corporation, to IMS International, Inc., a corporation duly organized and existing under the laws of New York, U.S.A. and IMS A. G. Zug, a corporation duly organized and existing under the laws of Switzerland, pursuant to Section 24(b)(1) of the Tax Code, as amended by Presidential Decree Nos. 369 and 778. As per certification of Norman F. Krieg, Director, Management Audits, Inc., Lagerstrasse 107, 8004 Zurich, attested by the Chancery of State of the Canton of Zurich on December 23, 1976 and authenticated by our Philippine Consulate at Zurich, Switzerland, the dividend income of companies in Zug, Switzerland is free of direct Swiss Federal, cantenal and communal taxes if the investment by the Swiss corporation is not less than 20% of the capital of the other corporation. In reply, I have the honor to inform you as follows: It appearing that IMS A. G. Zug holds 49.625% of the capital of your client and, therefore, Switzerland, the country of domicile of said recipient corporation, does not impose any income tax on the dividend accruing to the said corporation, the dividend payable by your client to the said Swiss corporation is subject to the withholding tax at the rate of 15% only. With respect to the dividend to be remitted by your client to IMS International, Inc., domiciled in U.S., it appears that 49.75% of the capital stock of your client is owned by the said recipient foreign corporation. Accordingly, and considering that under the present provisions of the U.S. Federal Tax Code, the amount of tax deemed paid on such dividends, and accordingly, to be credited against U.S. tax on said dividends, exceeds the 20% requirement of Presidential Decree No. 369, this Office hereby certifies that the dividends which your client will remit to IMS International, Inc., domiciled in U.S., are subject to withholding tax at the rate of 15% only. (BIR Ruling No. 76-004 dated July 19, 1976). Very truly yours, EFREN I. PLANA Acting Commissioner of Internal Revenue TAN-P4519-F2828-A-8 "TAXPAYERS SHOULD INDICATE THEIR TAN IN ALL COMMUNICATIONS TO THE BIR."