15% — Remittance Tax — Philippine subsidiary

June 6, 1979 BIR RULING NO. 032-79 15% Remittance Tax Philippine subsidiary In reply to your letter dated August 21, 1978, in behalf of your client, Philippine Geothermal, Inc., I have the honor to confirm your opinion that the 15% remittance tax imposed by Section 24 (B) (2) of the Tax Code of 1977 on profits remitted abroad by a branch office to its mother company is an income tax. The above conclusion can be drawn from the fact that the 15% remittance tax is imposed under "Title II Income Tax" of the Tax Code and that it is based on profits derived by the branch. Moreover, while dividends remitted by Philippine subsidiaries to their head offices abroad are subject to the withholding income tax at the rate of 15% under certain conditions, P.D. No. 778 which took effect on August 24, 1975, subjected profits remitted by a branch to its mother company abroad to remittance tax at a higher rate of 20%. Pursuant to P.D. No. 1158-A, said remittance tax was reduced to 15% so as to place the taxation of the profits of a branch at par with the dividend remittances of foreign subsidiary. Such reduction also supports the conclusion that the 15% remittance tax is income tax. cd