BIR Ruling [DA-326-98]

July 17, 1998 BIR RULING [DA-326-98] Mitsuwa Philippines, Inc. Lot 4, 6 & 8, Block 22, Phase IV Cavite Economic Zone Rosario Cavite Attention: Ms . Josefina H . Maravillas Asst . Dept . Manager-Accounting/Finance Gentlemen : This refers to your letter dated March 4, 1998, in effect, requesting approval of your application for relief from double taxation on your dividend payments to Mitsuwa Chemical Co. Ltd. (MCCL) of Japan. Documents submitted disclosed that Mitsuwa Philippines, Inc . (MPI) is a zone export enterprise registered with the Export Processing Zone Authority (EPZA) with Certificate of Registration No. 94-65; that MPI's Board of Directors decided to pay dividends to all its existing stockholders; and that MCCL of Japan, a non-resident corporation, holds a majority of the voting shares of MPI. 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 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 MCCL shall be subject only to the final withholding tax rate of 10% on the gross amount thereof which should be withheld before actual remittance. (BIR Ruling No. 165-94 dated December 5, 1994) This ruling is being issued on the basis of the foregoing facts as represented. However, if it will be disclosed that the facts are different upon investigation, then this ruling shall be considered null and void. cdti Very truly yours, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)