Rate of Withholding Tax on the Cash Dividends

June 28, 1988 BIR RULING NO. 275-88 21, 24; 25 000-00 275-88 Gentlemen : This refers to your letter dated May 25, 1988 requesting a ruling on the rate of withholding tax on the cash dividends declared by you to your stockholders on record as of May 15, 1988 payable on or before May 31, 1988. It is represented that your stockholders are as follows: (A.) Individuals 1. Filipino citizens 2. Resident aliens 3. Non-resident aliens-based in United States of America, Canada, HongKong, Australia, Colombia, Japan, England, China and India; acd (B.) C orporations 1. Domestic 2. Foreign a. Resident foreign b. Non-resident foreign-based in United States of America, Canada, HongKong, Australia, Colombia, Japan, England, China and India. In reply thereto, I have the honor to inform you as follows: A. Stockholders who are Filipino citizens and resident aliens are subject to a tax of 5% on said cash dividends pursuant to Section 21(e)(2) of the Tax Code, as amended; B. Stockholders who are non-resident aliens and non-resident foreign corporations from the following countries: 1. United Kingdom a. 15% of the gross amount of the dividends if the beneficial owner is a company which controls directly of indirectly at least 10% of the voting power in the company paying the dividends [art. 9(1)(a) RP-UK Tax Treaty]; b. In all other cases, 25% of the gross amount of the dividends. [Art. 9(1)(b) RP-UK Tax Treaty]; acd 2. United States of America a. 25 percent of the gross amount of the dividend [Art 11 (2)(a) RP-US Tax Treaty]; b. When the recipient is a corporation, 20 percent of the gross amount of the dividend if during the part of the paying corporation's taxable year which precedes the date of payment of the dividends and during the whole of its prior taxable year (if any), at least 10 percent of the outstanding shares of the voting stock of the paying corporation was owned by the recipient corporation [Art. 11(2)(b) RP-US Tax Treaty]; 3. Australia a. In the case of dividends derived by a company, not exceeding 15 percent of the gross amounts of the dividends where relief, either by way of rebate or credit as described in paragraph (2) of Article 24 or relief by way of credit as described in the second sentence of paragraph (4) of Article 24 both of the RP-Australia Tax Treaty is given to the beneficial owner of the dividends [Art. 10(2)(a) RP-Australia Tax Treaty]; b. In any other case, not exceeding 25 percent of the gross amount of the dividends [Art. 10(2)(b) RP-Australia Tax Treaty]; 4. Canada 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% of the voting power of the company paying the dividend [Art. X(2)(a) RP-Canada Tax Treaty]; b. 25 percent of the gross amount of the dividends in all other cases. [Art. X(2)(b) RP-Canada Tax Treaty]; 5. Japan a. 10 percent of the gross amount of the dividends if the beneficial owner is a company which holds directly at least 25 percent either of the voting shares of the company paying the dividends or of the total shares issued by that company during the period of six months immediately preceding the date of payment of the dividends [Art. 10(2)(a) RP-Japan Tax Treaty]; b. 25 percent of the gross amount of the dividends in all other cases. [Art. 10(2)(b) RP-Japan Tax Treaty]; C. Non-resident alien stockholders who are residents of HongKong, China, Colombia and India are subject to a tax of 30% of said dividends pursuant to Section 22(b) of the Tax Code, as amended; D. Dividends received by domestic and resident foreign corporation from a domestic corporation are not subject to tax pursuant to Sections 24(e)(4) and 25(a)(6)(D) of the Tax Code, as amended; and E. Pursuant to Section 24(b)(5)(B) of the Tax Code, as amended on dividends received from a domestic corporation by non-resident foreign corporation in which the Philippines has not concluded a tax treaty like HongKong, China, India and Colombia the tax shall be 15% of the dividends received, which shall be collected and paid as provided in Section 50(a) of the Tax Code, as amended, subject to the condition that the country in which the non-resident foreign corporations is domiciled shall allow a credit against the tax due from the non-resident foreign corporation, taxes deemed to have been paid in the Philippines equivalent to 20% which represents the difference between the regular tax (35%) and the tax (15%) on dividends otherwise said dividends shall be subject to a tax of 35% pursuant to Section 25(b)(1) of the Tax Code, as amended. cdtech Very truly yours, (SGD.) BIENVENIDO A. TAN, JR. Commissioner