Applicability of Withholding Tax — Non-Resident Aliens and Non-Resident Foreign Corporations

June 21, 1979 BIR RULING NO. 041-79 Applicability of withholding tax non-resident aliens and non-resident foreign corporations This refers to your letter dated January 5, 1979 requesting a ruling on whether the dividends received by non-resident Filipino citizens from domestic corporations are subject to the 10% withholding tax under Section 53(c) of the Tax Code of 1977. In reply, I have the honor to inform you in the negative, there being no provision of law which requires the said withholding. Section 53(b) of the Tax Code of 1977 requires withholding of tax only in cases of income derived within the Philippines by non-resident aliens and non-resident foreign corporations not engaged in trade or business in this country. Section 53 (c) of the same Code requires withholding at source of 10% tax only from dividends received from domestic corporation by individuals residing in the Philippines. However, pursuant to Revenue Regulations No. 8-76 as amended implementing Section 77 of the Tax Code, the Payor corporation is required to render an information return (BIR Form 1701B) on the remittances made in a calendar year to non-resident Filipino citizens of dividends in the aggregate amount of P1,800.00 or more. Since said dividends constitute income derived from sources within the Philippines, (Sec. 37 (a)(2)(A), Tax Code), the Filipino recipients thereof who are residing abroad must file income tax returns on BIR Form No. 1701 or 1701A, as the case may be, declaring therein said dividends. They shall also filed separate income tax returns on BIR Form No. 1701 covering income derived from foreign sources. (Sec. 4, Revenue Regulations No. 1-79 dated January 8, 1979).