BIR Ruling No. 013-62

January 15, 1962 BIR RULING NO. 013-62 The Honorable The Secretary of Finance M a n i l a Attention : Chief , Technical Staff S i r : There is returned to you herewith the letter of the Satellite Rubber Industry Company, Ltd. dated May 25, 1959, referred to us by your 1st Indorsement dated June 4, 1959, for comment. For income tax purposed, the partnership, Satellite Rubber Industry Company, Ltd., shall be considered a corporation under Sections 24 and 84 of the Tax Code. As such, the rule that exemption of a corporation from income tax does not have the effect of exempting its stockholders, shall also apply to the partnership is question. Dividends received by a stockholder are subject to income tax, even though the corporation earning such dividends is exempted from said tax. The reason is that a corporation has a personality distinct from that of its stockholders, enabling the taxing power to reach the latter when they receive dividends from the corporation. (See Manila Gas Corporation vs. Collector of Internal Revenue, 62 Phil. 895 Gatchalian, et al. vs. Collector of Internal Revenue, 67 Phil. 666). Upon the same principle, it has been held that dividends of a domestic corporation which are paid and delivered in cash to foreign corporations as stockholders are subject to the payment of the income tax, the exemption clause in the charter of the corporation, notwithstanding. (Phil. Telephone and Telegraph Co. vs. Collector of Internal Revenue, 58 Phil. 639). In view of the foregoing considerations, this Office is of the opinion that the exemption of the Satellite Rubber Industry Co., Ltd., from income tax, covered by the Certificate of Exemption granted to it by the Department of Finance under Republic Act No. 901, does not necessarily include the income distributed to the partners thereof. Very truly yours, MELECIO R. DOMINGO Commissioner of Internal Revenue