BIR Ruling [DA-055-96]

February 2, 1996 BIR RULING [DA-055-96] Sycip Gorres Velayo & Co. Philamlife Building Jones Avenue, Cebu City Attention: Atty . L . L . De la Pea Gentlemen : This refers to your letter dated July 25, 1995 requesting for a ruling that the proposed remittance of cash dividends in the amount of P40,000,000.00 by your client, Taiyo Yuden (Phils.), Inc. (TYPI) to Taiyo Yuden Co., Ltd. (TYCL) of Japan is subject only to 10% withholding tax pursuant to Art. 10 (2) (a) of the RP-Japan Tax Treaty. cd It is represented that TYPI, a wholly-owned subsidiary of TYCL, is a domestic corporation organized and existing under Philippine laws with principal office at Mactan Export Processing Zone, Lapu-lapu City; that TYCL is a non-resident foreign corporation organized and existing under the laws of Japan with principal office at 16-20, Ueno 6-chome, Taitoku, Tokyo, Japan; that for the period January 1, 1995 to June 1, 1995, TYCL's shareholdings in TYPI amounted to 99.95% of the total subscribed and issued capital stock of the latter; that on June 1, 1995, TYPI declared cash dividends to its stockholders of record as of May 31, 1995 amounting to P40,000,000.00; that of the said declaration, TYCL's share in the total cash dividends declared amounted to P40,000,000.00. In support of your request, you submitted copies of the following documents: a) BIR Application Form TC-001; b) Articles of Incorporation of TYCL; c) Certification from the Securities and Exchange Commission (SEC) that the income recipient is not registered to engage in business in the Philippines; d) Secretary's Certificate showing the number and value of the shares of TYCL and the percentage of its ownership in TYPI for the period January 1, 1995 to June 1, 1995; e) Board Resolution approving declaration of dividends dated June 1, 1995; f) Special Power of Attorney executed by TYCL authorizing TYPI to file a claim for tax relief application duly authenticated by the Philippine Consulate in Tokyo, Japan; and g) Monthly Remittance Return of Income Taxes Withheld (BIR Form No. 1743W) for the month of June duly validated by the bank evidencing payment of P4,000,000.00 or 10% of the total cash dividends declared. In reply, please be informed that under Article 10 (2) (a) of the RP-Japan Tax Treaty, the tax on dividends is 10% of the gross amount of the dividends if the beneficial owner is a Company which holds directly at least 25% either of the voting shares of the Company paying the dividends or of the total shares issued by the Company during the period of six months immediately preceding the date of payment of dividends. Since TYCL holds more than 25% of the shares of stocks issued by TYPI, the dividends issued and payable to TYCL by TYPI are subject to 10% withholding tax on the gross amount thereof. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation it will be disclosed that the facts are different, then this ruling shall be considered null and void. (BIR Unnumbered Ruling No. 293-94 dated October 17, 1994, citing BIR Ruling No. 279-82 dated October 14, 1982). cdtech Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service) By: ALICIA L. TOMACRUZ Head Revenue Executive Assistant (Legal Service)