Tax Return for Foreign Investors to be Filed by the Designated Fiduciary Shall be the Tax Return of the Non-Resident Foreign Corporation Doing Business in the Philippines

September 17, 1996 BIR RULING NO. 101-96 25 000-00 101-96 A.A. Amador & Associates 18F Pacific Star Building Sen. Gil Puyat corner Makati Avenue Makati City Attention: Mr . Demosthenes B . Donato, Esq . Gentlemen : This refers to your letter dated March 15, 1996 stating that you represent two foreign corporations each of which has purchased two separate condominium properties (hereafter "Condocorp One and Condocorp Two" and collectively referred to as "Investors"); that the two condominium properties purchased (hereafter "Realty Assets") all fall within the forty percent limit which a condominium corporation can sell to foreign corporations such as the Investors; that the Investors have identical shareholders and directors and all have leased their Realty Assets to local tenants and thus the Investors generate rental income from their Realty Assets situated within the Philippines; that Condocorp One and Condocorp Two are willing to apply for and register to do business in the Philippines with the Securities and Exchange Commission ("SEC") but both are unlikely to be approved to register to do business in the Philippines because of present laws and the regulations of the SEC promulgated thereunder relating to the minimum capitalization of foreign corporations (US$ 500,000) and the debt to equity requirements for such foreign corporations that Condocorp One and Condocorp Two now want to lodge their corporate income tax returns but are unable to do so because under the prevailing rules of the Bureau of Internal Revenue, Condocorp One and Condocorp Two cannot secure Tax Identification Numbers (TIN) and thus cannot file their returns; that both corporations cannot secure their TIN because of the rules of the SEC. LLphil It is further represented that the problem stated is not an isolated one. There are literally hundreds perhaps thousands of foreign corporations who have purchased condominium properties and who want to lodge returns for the rental income they derive from their condominium properties, but are unable to do it because they do not have a TIN as they are not SEC registered since they are not qualified to so register, before the SEC; hence, and the investors, i.e. Condocorp One and Condocorp Two are contemplating the appointment of a Fiduciary under the following conditions: 1. The assets to be accounted for by the Fiduciary will be all the income derived by the Investors from the Realty Assets. 2. The Fiduciary will be a Law Firm and the beneficiaries will be both the Investors. 3. The rental income received by the Fiduciary from the Realty Assets will be currently distributed to the Investors and therefore such income distributed can be classified as taxable income falling under Section 53 (a) (2) of the NIRC. 4. No deduction shall be taken by the Fiduciary for any distribution it currently makes to the Investors in computing taxable income of the assets under the control of the Fiduciary. In reply, please be informed that based on the foregoing facts, the investors have the status of non-resident foreign/corporation doing business in the Philippines as contemplated under Section 20 of the Tax Code. Accordingly, your queries are answered as follows: 1. The tax return for the foreign investors to be filed by the designated fiduciary shall be the Tax return of the non-resident foreign corporation doing business in the Philippines. (Section 25, Tax Code) 2. Only rental income shall be indicated in the Income Tax Return. 3. The TIN of the fiduciary will suffice to effect the withholding of the income tax from the remittances of rental income to the foreign investors. Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue