BIR Ruling [DA-399-99]

July 9, 1999 BIR RULING [DA-399-99] Philippine Hanse Ship Agency, Inc. 28 Lapu-lapu Avenue Magallanes Commercial Area Magallanes, Makati City Attention: Mr. Reiner Schwarting General Manager Gentlemen : This refers to your letter dated August 3, 1995 requesting confirmation of your opinion that the cash dividend remitted by you to your foreign shareholder, Hanseatic Shipping Company Ltd., which is domiciled in Limassol, Cyprus, shall be subject to the preferential rate of 15% instead of 35% pursuant to Section 25(b)(5)(B) of the Tax Code, as amended [now Section 28(B)(5)(b) of the Tax Code of 1997]. It appears that you are a domestic corporation duly registered with the Securities and Exchange Commission (SEC); that Hanseatic Shipping Company Ltd., a non-resident foreign corporation domiciled in Limassol, Cyprus is a shareholder of record at the time of the declaration of cash dividends; and that Cyprus law does not impose any tax on income from foreign sources. In reply, please be informed that Section 25(b)(5)(B) of the Tax Code, as amended [now Section 28(B)(5)(b) of the Tax Code of 1997], provides, viz : "xxx xxx xxx "(5) Tax on certain incomes received by non-resident foreign corporation. caIEAD "(A) . . . "(B) On dividends received from a domestic corporation liable to tax under this Chapter, the tax shall be 15% of the dividends received, which shall be collected and paid as provided in Section 50(a) of the National Internal Revenue Code, as amended, 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 non-resident foreign corporation, taxes deemed to have been paid in the Philippines equivalent to 20% which represents the difference between the regular tax (35%) on corporations and the tax (15%) on the dividends as provided in this subparagraphs;" "xxx xxx xxx" A certification dated July 14, 1995 by Deloitte Touche Tohmatsu International, with postal address at P.O. Box 3180 Eftapaton Court, 256 Makario Avenue, Limassol, Cyprus, and duly authenticated by the Consul of the Philippines in Cyprus states that Hanseatic Shipping Company Limited is not liable to tax in Cyprus on income from foreign sources. Accordingly, the cash dividends paid by you to the Hanseatic Shipping Company Ltd. shall be subject only to the fifteen percent (15%) withholding tax pursuant to Section 25(b)(5)(B) of the Tax Code, as amended [now Section 28(B)(5)(b) of the Tax Code of 1997. (BIR Ruling No. 105-92 dated March 30, 1992) This ruling is issued on the basis of the foregoing representations. However, if upon investigation, it will be disclosed that the facts are different, then ruling shall be declared null and void. HAEDCT Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)