BIR Ruling

March 25, 1977 Mr. Eldridge D. Wood, Jr. Vice President Private Investment Company for Asia (PICA), S.A. P. O. Box 7333 Airmail Exchange Office MIA 3120, Philippines S i r : This refers to your letter dated March 4, 1977 requesting a certification to the effect that the dividend remittances due to your firm from the following companies: 1. Atlantic Gulf and Pacific Co. of Manila, Inc. 2. Private Development Corporation of the Philippines 3. Philippine Investments Systems Organization 4. Philippine Electric Company 5. William Lines, Inc. are subject to withholding tax of 15% only instead of the regular rate of 35%, in accordance with Section 24(b) of the Tax Code, as amended by Presidential Decree No. 778. It is represented that PICA, S.A. is organized under the laws of the Republic of Panama and is not engaged in trade or business in the Philippines, while the companies enumerated above are domestic corporations. cd Under Section 24(b) of the Tax Code, as amended, the domestic corporation is liable for the payment of the 15% withholding tax "subject to the condition that the country in which the non-resident foreign corporation is domiciled shall allow a credit against the tax due from the non-resident foreign corporation, taxes deemed to have been paid in the Philippines equivalent to 20% which represents the difference between the regular tax (35%) on corporations and the tax (15%) on dividends as provided in this section . . ." Under this provision, the 15% tax on dividends is applicable if the country where the recipient non-resident foreign corporation is domiciled does not impose any tax on dividends received by said recipient foreign corporation. The certification issued by the Director General of Revenues of the Republic of Panama, Mr. Aurelio Correa E. and authenticated by the Philippine Consul General, Ad Honorem, Pedro E. Arias, states: "xxx xxx xxx ". . ., income originating from dividends or other distributions of juridical entities is not considered as produced within the territory of the Republic of Panama, when such dividends or distributions originate from income not produced within the territory of the Republic of Panama. "(3) Dividends or shares of participation which originate from income not produced within the territory of the Republic of Panama, are not subject to income tax." From the foregoing excerpt, it is clear that the dividend remittances that the above-enumerated companies will send to you, having originated from; income produced in the Philippines, a source outside Panama, are not subject to Panamanian income tax. In view thereof, this Office is of the opinion as it hereby holds that the dividends which your firm will receive from: 1. Atlantic Gulf and Pacific Co. of Manila, Inc. 2. Private Development Corporation of the Philippines 3. Philippine Investments Systems Organization 4. Philippine Electric Company 5. William Lines, Inc. shall be subject to the withholding tax of 15% only. Very truly yours, EFREN I. PLANA Acting Commissioner of Internal Revenue TAN-P4519-F2828-A-8