Nippon Antenna (Philippines), Inc.

February 15, 2007 BIR RULING [DA-093-07] ITAD 061-05 Nippon Antenna (Philippines), Inc. Block 12, Lots 3 & 4, First Cavite Industrial Estate Dasmarias, Cavite Attention: Toshikazu Taira Admin. General Manager Gentlemen : This refers to your letter dated January 22, 2007 stating that Nippon Antenna (Phils.), Inc. is domestic corporation duly registered with the Philippine Economic Zone Authority (PEZA); that it is engaged in the manufacture of car radio antenna and other related product solely for export; that it operates its business exclusively in the First Cavite Industrial Estate, a special economic zone under PEZA; that Nippon Antenna (Phils.), Inc. is a wholly owned subsidiary of Nippon Antenna Co. Ltd., a non-resident foreign corporation organized and operating under the laws of Japan; that its business operation has started 10 years ago and has been paying the 5% preferential tax rate based on the gross income earned; that presently, Nippon Antenna (Phils.), Inc. declared Fifty Six Million Yen (Y56,000,000) cash dividend to be issued this January to all its shareholders, including Nippon Antenna Co., Ltd. Based on the foregoing representations, you now request for an opinion that the cash dividend to be received by Nippon Antenna Co., Ltd. is subject only to the 10% preferential tax rate pursuant to the RP-Japan Tax Treaty. In reply thereto, please be informed that in ITAD Ruling No. 061-05 dated June 22, 2005, this Office ruled that ". . . the 10 percent preferential tax rate on dividends applies whenever the beneficial owner/recipient of the dividend owns directly at least 25 percent of the capital of the paying company or of the total shares issued by that company during the period of six months immediately preceding the date of payment of the dividends. In all other cases, the 25% preferential tax rate applies. Such being the case, and considering that NCSL holds 99.93% of the total shares of PNSI during the period of six (6) months immediately preceding the date of payment of the dividends, this Office is of the opinion and so holds that the dividend payments by PNSI to NSCL shall be subject to the preferential tax rate of 10%, based on the gross amount thereof, pursuant to Article 10(2)(a) of the RP-Japan Tax Treaty. . . ." At this juncture, observation has to be made of the fact that since Nippon Antenna Co., Ltd., the beneficial owner/recipient of the dividend, holds 100% of the total shares of Nippon Antenna (Phils.), Inc., this Office holds that the cash dividend to be received by the former from the latter is subject to the 10% preferential tax rate pursuant to Article 10 (2) (a) of the RP-Japan Tax Treaty. EAHDac 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. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service