BIR Ruling [DA-190-99]

March 26, 1999 BIR RULING [DA-190-99] SPI Technologies Inc. SPI Building, Pascor Drive Sto. Nio, Paraaque Metro Manila Attention: Mr . Eduardo S . Bagtas Chief Financial Officer Gentlemen : This refers to your letter dated September 18, 1997 requesting for a tax treaty relief through a preferential tax rate of twenty five percent (25%) to be withheld on the dividend remittance to Robert W . Brown in accordance with the provisions of the RP-US Tax Treaty. Documents show that SAZTEC Philippines, Inc. (SPI) is duly registered with the Board of Investments with Certificate of Registration No. EP94-355; that at a duly constituted meeting of the Board of Directors of SPI held on August 12, 1997, the said Board resolved to declare a cash dividend of P0.16 per share or an aggregate amount of P9,627,778 out of the unrestricted retained earnings of the corporation as of December 31, 1996, payable to the stockholders of record of the corporation on the basis of the outstanding shares held by them as of September 11, 1997; that one of SPI's stockholders is Robert W. Brown residing at 14100 58th Street North, Clearwater, Florida 33760 USA; that Robert W. Brown has 5 shares outstanding in SPI Book as of September 11, 1997 with gross dividend in the amount of P0.80; and that the amount of withholding tax paid to this Office applying the 25% tax rate is P0.20. In reply, please be informed that under Article 11 (1) and (2)(a) of the RP-US Tax Treaty, pertinent portion of which reads: "ARTICLE 11 DIVIDENDS "(1) Dividends derived from sources within one of the Contracting States by a resident of the other Contracting State may be taxed by both Contracting States. (1) The rate of tax imposed by one of the contracting States on dividends derived from sources within that Contracting State by a resident of the other contracting State shall not exceed (a) 25 percent of the gross amount of dividend; or (b) . . . xxx xxx xxx" Accordingly, the amount of P.80 to be paid to Robert W. Brown as dividends shall be subject to the preferential tax rate of 25% which shall be withheld before actual remittance thereof. (BIR Ruling No. 56-98 dated May 21, 1998) LibLex Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)