15% Withholding Tax on Dividends Paid and/or to be Paid or Remitted by Pillsbury-Mindanao Flour Milling Co., Inc.

March 28, 1988 BIR RULING NO. 124-88 24 000-00 124-88 Gentlemen : This refers to your letter dated February 6, 1988 requesting a ruling to the effect that dividends paid and/or to be paid or remitted by your client, Pillsbury-Mindanao Flour Milling Co., Inc., in favor of Pillsbury Holdings (Canada) Ltd. a non-resident foreign corporation domiciled in Canada is subject to a 15% withholding tax. It is represented that Pillsbury-Mindanao Flour Milling Co., Inc. is a domestic corporation with principal office located in Cebu City; and that it is engaged principally in the manufacture of flour, 39.98% of its voting shares is owned by Pillsbury Holdings (Canada) Ltd. and 60% by Filipinos. In reply, thereto, I have the honor to inform you that Article X of the RP-Canada Tax Treaty provides in part as follows: "ARTICLE X Dividends "1. Dividends paid by a company which is a resident of Canada to a resident of the Philippines may be taxed in the Philippines. However, such dividends may also be taxed in Canada, but where the beneficial owner of the dividends is a resident of the Philippines, the tax so charged shall not exceed 15 percent of the gross amount of the dividends. "2. Dividends paid by a company which is a resident of the Philippines to a resident of Canada may be taxed in Canada. However, such dividends may also be taxed in the Philippines, but where the beneficial owner of the dividends is a resident of Canada the tax so charged shall not exceed: (a) 15 percent of the gross amount of any dividend paid to a company which is a resident of Canada which controls at least 10 percent of the voting power of the company paying the dividend; or (b) 25 percent of the gross amount of the dividends in all other case. "3. . . . "4. . . . "5. . . . "6. . . . "7. . . . Such being the case, and since Pillsbury Holdings (Canada) Ltd. is the owner of 39.98% of the voting shares of Pillsbury-Mindanao Flour Milling Co., Inc. dividends paid and/or to be paid or remitted by the latter to the former is subject to a 15% withholding tax pursuant to paragraph 2(a), Article X of the RP-Canada Tax Treaty. cdtech Very truly yours, (SGD.) EUFRACIO D. SANTOS Deputy Commissioner