Preferential Tax Rate of 10% Withheld from Dividend Remittances can be Allowed as a Credit

December 29, 1994 BIR RULING NO. 185-94 25 (b) 000-00 185-94 Mitsumi Philippines, Inc. Cebu Mitsumi, Inc. Manila Office (FMO) 4th Floor, Port Royal Place Bldg. 118 Rada St., Legazpi Village Makati, Metro Manila Attention: Hector Taleon, Jr . Senior Supervisor Gentlemen : This refers to your letter dated September 22, 1994 requesting for a confirmation of your opinion that the preferential withholding tax rate of 10% of the gross amount of dividend remittance by Cebu Mitsumi to Mitsumi Electric Company, Ltd. of Japan can be allowed as a credit against the Japanese tax liability on dividends received from the former. It appears that Mitsumi Electric Co., Ltd. is the controlling stockholder of Cebu Mitsumi. In reply, please be informed that pursuant to Article 23, paragraph 1 of the RP-Japan Tax Treaty, stating "Article 23 "(1) Subject to the laws of Japan regarding the allowance as a credit against Japanese tax of tax payable in any country other than Japan, Philippine tax payable in respect of income derived from the Philippines shall be allowed as a credit against Japanese tax payable in respect of that income. Where such income is a dividend paid by a company which is a resident of the Philippines to a company which is a resident of Japan and which owns not less than 25 per cent either of the voting shares of the company paying the dividend or of the total shares issued by that company, the credit shall not take into account Philippine tax payable by the company paying the dividend in respect of its income." the preferential tax rate of ten percent (10%) which is withheld from your dividend remittances to Mitsumi (Japan) can be allowed as a credit against the Japanese tax payable by the latter on its dividend income received from Cebu Mitsumi. llcd Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue