BIR Ruling [DA-233-99]

April 14, 1999 BIR RULING [DA-233-99] SGV & Co. 6760 Ayala Avenue Makati City Attention: Atty . C . P . Noel Gentlemen : This refers to your letter dated December 2, 1998 requesting for a confirmation of your opinion that the dividends derived by Tupperware Asia Pacific Holdings Private Limited (Tupperware ) from its investments in Philippine shares are subject to a withholding tax at the rate of 15%. cdtech It appears that Tupperware is a corporation organized and existing under the laws of Mauritius, a country without a tax treaty with the Philippines; that Tupperware is an offshore company registered under the Mauritius Offshore Business Activities Act of 1992, that under said Act, the rate of tax on Tupperware's chargeable income is zero percent (0%); and that Tupperware proposes to invest in Philippine shares which are either listed or unlisted on the Philippine Stock Exchange, from which it will derive dividends. In reply, please be informed that under Section 28(B)(5)(b) of the Tax Code of 1997, cash and/or property dividends received by non-resident. foreign corporations from a domestic corporation shall be subject to a final withholding tax at the rate of 15% 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 nonresident foreign corporation taxes deemed to have been paid in the Philippines equivalent to 20% for 1997, 19% for 1998, 18% for 1999 and 17% thereafter, which represents the difference between the regular income tax of 35% in 1997; 34% in 1998, 33% in 1999; and 32% thereafter on corporations. Moreover, the Supreme Court in the case of Commissioner of Internal Revenue vs. Wander Philippines, Inc. (160 SCRA 573, April 15, 1988) has considered the total exemption of dividends received by the non-resident corporate stockholders from taxes in its country of domicile as sufficient basis for the application of the 15% tax rate, and ruled that since the Swiss Government does not impose any tax on the dividends receive by the parent company from the Philippines, the 20% tax credit required under Section 24(b)(1) of the Tax Code [now Section 28(B)(5)(b) of the Tax Code of 1997] is satisfied, therefore, the withholding tax rate of 15% applies. Said Supreme Court ruling was later applied by the Court of Tax Appeals in the case of Caltex (Philippines) Inc. vs. Commissioner of Internal Revenue (CTA Case No. 4986, October 6, 1995) where the dividends remitted to a resident of Bermuda that does not impose tax on dividends is subjected to the 15% withholding tax. Inasmuch as the dividend income of Tupperware from Philippine shares are subject to zero percent (0%) tax rate in Mauritius, your opinion therefore that said dividends received by Tupperware from its investment in Philippine shares should only be subject to the 15% withholding tax, is hereby confirmed. cdlex 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, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)