Tax Aspects of Certain Remittances of Foreign Exchange Representing Proceeds of Sale of Foreign Equity Investments in the Philippines

August 25, 1980 BIR RULING NO. 116-80 Management of External Debt and Investment Accounts Department Central Bank of the Philippines M a n i l a Attention: Mr . A . Z . Tiangco Director Gentlemen : In reply to your letter dated April 18, 1980 requesting legal advice on the tax aspects of certain remittances of foreign exchange representing proceeds of sale of foreign equity investments in the Philippines, I have the honor to inform you as follows: 1. Sales of shares of stock listed in any of the local stock exchange by a resident foreign corporation . If the shares were acquired before November 5, 1970, the gain derived is subject to the capital gains (income) tax. If the shares were acquired after November 5, 1970, the sale is subject to the 1/4 of 1% stock transaction tax. If in both instances, the proceeds of sale were remitted by the branch office of the resident foreign corporation to its head office, the branch shall be subject to the 15% remittance tax based on the profits derived from the sale of shares, pursuant to Section 24(b)(2) of the Tax Code of 1977, as amended. (BIR Ruling Nos. 016-79 and 024-79). 2. Sales of shares of stock not listed in any of the local stock exchanges by a resident foreign corporation . The answer in No. 1 as applicable. 3. Sales of shares of stock listed in any of the local stock exchange by a non-resident alien individual of non-resident foreign corporation . The answer in No. 1 is also applicable, except that the 15% profit remittance tax does not apply. 4. Sales of shares of stock not listed in any of the local stock exchange by a non-resident individual or a non-resident foreign corporation . cd The answers in No. 1 and 3 are also applicable. As regards the status of regional or area headquarters of multinational companies in the Philippines for purposes of authorizing the remittances of the proceeds of sale of their equity investments in the Philippines, it is noted that said headquarters do not derive any income from sources in the Philippines and do not participate in any manner in the management of any subsidiary or branch office its parent company might have in the Philippines. [Sec. 8(b)(2), P.D. No. 218]. In other words, a multinational company may or may not have a branch in the Philippines. In the affirmative case, if the proceeds of sale of shares are remitted to the parent company, the branch shall be subject to the 15% remittance tax based on the profits derived from the sale. Very truly yours, TOMAS C. TOLEDO RUBEN B. ANCHETA Acting Commissioner