BIR Ruling No. 114-83
BIR Ruling No. 114-83 • Bureau of Internal Revenue (BIR) Issuances • Rulings (Numbered) • Jun 27, 1983
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June 27, 1983 BIR RULING NO. 114-83 Gentlemen : This refers to your letter dated June 1, 1983 requesting a ruling on the appropriate withholding tax due on dividends to be paid by Trans Malayan Shipping, Inc. (TMSI), Trans Swedish Shipping, Inc. (TSSI), Trans European Shipping, Inc. (TESI), and Skanfil Shipping, Inc. (SSI) to their Swedish corporate shareholders. It is represented that the above-mentioned companies are local companies jointly owned by Filipino nationals 60% and Swedish nationals 40%; that they all enjoy income tax exemption under RA 1407, as amended; and that they are allowed to declare dividends annually equivalent to not more than 10% of each accumulated earnings. In reply thereto, please be informed that under Article 6, paragraph 4 of the RP-Sweden Tax Treaty "Dividends paid by a corporation of one of the Contracting States to a corporation of the other Contracting State shall be exempt from tax in the last-mentioned State, to the extent allowed by its national law if both corporations had been corporations of that State." In other words, dividends paid by a Philippine corporation to a Swedish corporation shall be exempt from tax in Sweden to the extent allowed by its national laws as of both corporations had been corporations of Sweden. Under the Swedish law, dividends received by resident company are exempt, if the recipient company owns at least 25% of the voting power of the distributing company. [Supplement No. 34 Nov. 1977, 1977 International Bureau of Fiscal Documentation]; hence, dividends paid by a Philippine corporation to a Swedish corporation shall likewise be exempt from tax in Sweden. cdta The exemption in Sweden of dividends from a Philippine corporation to a Swedish corporation satisfies the requirement of Section 24(b)(1)(iii) of the Tax Code, in which case, the applicable withholding tax rate of the dividends payable by Trans Malayan Shipping, Inc. (TMSI), Trans Swedish Shipping, Inc. (TSSI), Trans European Shipping, Inc. (TESI), and Skanfil Shipping, Inc. (SSI) to their Swedish corporate shareholders shall be 15%. Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner Bureau of Internal Revenue
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