BIR Ruling

September 7, 1977 Messrs. Joaquin Cunanan & Co. 8th Floor, Rufino Bldg. 6784 Ayala Avenue, Makati Metro Manila Gentlemen : This refers to your letter dated March 21, 1977, requesting a certification from this Office that the dividends which your client, Olympia Business Machines Co. (Philippines) Inc. will remit to the Olympia Werke AG, Wilhelmshaven, Germany is subject to withholding tax at the rate of 15% instead of 35%. It appears that your client is a domestic corporation while the recipient corporation is organized under the laws of West Germany and is not engage in trade or business in the Philippines. Under Section 24(b) of the Tax Code, as amended by Presidential Decree No. 369, 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 . . ." Thus if the country of domicile of the recipient corporation allows as credit against the tax imposable by it an amount equivalent to 20% of the dividends, or if said foreign country does not impose any tax on the dividends remitted to corporations domiciled therein, the dividends so remitted are subject to withholding tax at the rate of 15% only. It appearing from the certification of the Embassy of the Federal Republic of Germany "that in accordance with German tax law, dividends received from a foreign corporation are not liable to be taxed anymore if they have been subject to withholding tax in the country of their origin," said dividends which your client, Olympia Business Machines Co. (Philippines) Inc. will remit to its parent company, Olympia Werke AG, Wilhelmshaven, Germany, is subject only to the 15% withholding tax, pursuant to Section 24(b) of the Tax Code, as amended. Very truly yours, EFREN I. PLANA Acting Commissioner of Internal Revenue TAN-P4519-F2828-A-8