Whether Dividends Received by a Resident Alien from MERALCO are Subject to 30% Withholding Tax

August 14, 1998 BIR RULING NO. 120-98 24 (B) (2)-000-00-120-98 Y.F. Busmente & Associates Unit 723 BPI Office Condominium Plaza Cervantes, Binondo, Manila Attention: Atty . Yolando F . Busmente Gentlemen : This refers to your letter dated May 6, 1998 requesting on behalf of your client, MR. GO BUN PIN, a resident alien, for a ruling as to whether or not the dividends he receives from MERALCO are subject to the withholding tax of 30%. prcd In reply, please be informed that pursuant to Section 24 (B)(2) of the Tax Code of 1997, a final withholding tax at the following rates shall be imposed upon the cash and/or property dividends actually or constructively received by an individual from a domestic corporation or from a joint stock company, insurance or mutual fund companies and regional operating headquarters of multinational companies, or on the share of an individual in the distributable net income after tax of a partnership (except a general professional partnership) of which he is a partner, or on the share of an individual in the net income after tax of an association, a joint account or a joint venture or consortium taxable as a corporation of which he is a member or a co-venturer, 6% beginning Jan. 1, 1998, 8% beginning Jan. 1, 1999 and 10% beginning Jan. 1, 2000 with the proviso that such tax on dividends shall apply only on income earned on or after January 1, 1998. Moreover, income forming part of retained earnings as of December 31, 1997 shall not, even if declared or distributed on or after January 1, 1998, be subject to the said withholding tax. Such being the case, and except for any dividend that may be received by your client out of the corporation's retained earnings as of December 31, 1997, dividends received by a resident alien shall be subject to the aforesaid rates of final withholding tax and not to the alleged 30% withholding tax being deducted from him everytime he receives his dividends from MERALCO. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation it will be disclosed that the facts are different, then this ruling shall be considered null and void. llcd Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue