BIR Ruling [DA-279-96]

July 26, 1996 BIR RULING [DA-279-96] Clarion Mitsuwa Philippines, Inc. 3/F Cacho Gonzales Bldg. 101 Aguirre St., Legaspi Village 1200 Makati City, Metro Manila Attention: Mr . Kuniaki Noya Director/Treasurer Gentlemen : This refers to your letter dated May 30, 1996, requesting approval of your application for relief from double taxation on dividend remittances to Clarion Co., Ltd. and Mitsuwa Chemical Co., Ltd. Documents submitted show that Clarion Mitsuwa Philippines, Inc. is a domestic corporation organized and existing under the laws of the Philippines and registered at the Cavite Export Processing Zone as a Zone Export Enterprise under Certificate of Registration No. 92-040 issued on July 6, 1992; that Clarion Co., Ltd. and Mitsuwa Chemical Co., Ltd. are both non-resident foreign corporations organized and existing under the laws of Japan not registered as engaged in business in the Philippines; that Clarion Co., Ltd. owns 33,147 shares of stock constituting 51% of the capital stock of Clarion Mitsuwa Philippines, Inc.; that Mitsuwa Chemical Co., Ltd. owns 31,040 shares of stock constituting 49% of the capital stock of Clarion Mitsuwa Philippines, Inc.; and that the said shares have been owned by Clarion Co., Ltd. and Mitsuwa Chemical Co., Ltd. since June 11, 1993. In reply, please be informed that pursuant to Article 10 of the RP-Japan Tax Treaty, pertinent portion of which reads "ARTICLE 10 "1) . . . "2) However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident, and according to the laws of that Contracting State, but if the recipient is the beneficial owner of the dividends the tax so charged shall not exceed: (a) 10 percent of the gross amount of the dividends if the beneficial owner is a company which holds directly at least 25 percent either of the voting shares of the company paying the dividends of the total shares issued by that company during that period of six months immediately preceding the date of payment of the dividends; xxx xxx xxx "3) Notwithstanding the provisions of paragraph (2), the amount of the tax imposed by the Philippines on the dividends paid by the company, being a resident of the Philippines, registered with the Board of Investments and engaged in the preferred pioneer areas of investment under the Investment Incentives laws of the Philippines to a resident of Japan, who is the beneficial owner of the dividends, shall not exceed 10 percent of the gross amount of the dividends." your dividend remittances to Clarion Co., Ltd. and Mitsuwa Chemical Co., Ltd. shall each be subject to the preferential tax rate of 10% which should be withheld before actual remittance. (BIR Ruling No. 165-94 dated December 5, 1994) This approval shall be valid for the dividend income covered by Stock Certificate Nos. 001 and 002. Very truly yours, ALICIA P. CLEMENO Assistant Commissioner (Legal Service) By: ALICIA L. TOMACRUZ Head Rev. Executive Assistant Legal Service