Intercorporate Dividends Exempt from Income Tax

April 25, 1989 BIR RULING NO. 081-89 25 (a) 000-00 081-89 Gentlemen : This refers to your letter dated October 21, 1988 requesting confirmation of your opinion to the effect that dividends paid by Everett Steamship Corporation (ESC) to Everett Orient Lines (EOL) are considered intercorporate dividends exempt from income tax. It is represented that ESC is a corporation organized and existing under Philippine Laws; that EOL is a foreign corporation engaged in international shipping or an international carrier; that for income tax purposes, EOL is paying 2 1/2% tax on its gross Philippine billings; that ESC is the shipping agent of EOL; and that EOL is the majority stockholder of ESC. In reply thereto, I have the honor to inform you that EOL as an international shipping line subject to the 2 1/2% tax on its gross Philippine billings pursuant to Section 25(a)(2) of the Tax Code, as amended is considered a resident foreign corporation. (BIR Ruling No. 25-a-000-00-302-87 dated September 23, 1987) Accordingly, dividends paid by ESC, its shipping agent in the Philippines to it are considered intercorporate dividends which are not subject to income tax pursuant to Section 25(a)(6)(D) of the Tax Code, as amended. cd Very truly yours, (SGD.) EUFRACIO D. SANTOS Deputy Commissioner