Tax Exemption on the Dividends Paid and Remitted to a Resident Foreign Corporation

February 3, 1987 BIR RULING NO. 026-87 25-a 180-86 026-87 Gentlemen : This refers to your letter dated January 19, 1987 stating that the Coca-Cola Bottlers Philippines, Inc. (CCBPI), a Philippine corporation, declared on December 16, 1986 cash dividends payable on December 29, 1986 to stockholders of record as of December 16, 1986, that one of its stockholders is your client, The Coca-Cola Export Corporation (TCCEC), a U.S. corporation with a branch in the Philippines; and that the Home Office of your client owns 30% of the outstanding capital stock of CCBPI. You now request for a ruling as to whether the dividends to be paid and remitted by CCBPI to the Home Office in the U.S. of TCCEC are subject to withholding tax. In reply, I have the honor to inform you that your query is answered in the negative. For Philippine income tax purposes, TCCEC is considered a resident foreign corporation because it is a foreign corporation having a branch engaging in business within the Philippines. [Sec. 20(h), Tax Code] Hence, the dividends to be paid and remitted by CCBPI to TCCEC, a resident foreign corporation is not subject to tax under Title II of the Tax Code, pursuant to Section 25(a)(6)(D) of the Tax Code, as amended by Executive Order No. 37 which provides: "(D) Intercorporate Dividends . Dividends received by a resident foreign corporation from a domestic corporation liable to tax under this Code shall not be subject to tax under this Title." Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner