BIR Ruling No. 279-82

October 14, 1982 BIR RULING NO. 279-82 24-b 199-81 279-82 Pelican Agro Products, Inc. Suites 612-614 Alliance Bldg. 410 Quintin Paredes Street Manila, Philippines Attention: Mr . Onofre M . Pantig President Gentlemen : This is with reference to your letter dated July 23, 1982 requesting information on the taxation of dividends issued to a foreign shareholder of your company, the Taiko Franchise Co., Ltd., Osaka, Japan. cdti Records show that the authorized capital stock of your corporation is 20,000 shares at a par value of P100.00 per share, divided into "Class A Common" equivalent to 60% owned by Philippine Nationals and "Class B Common" equivalent to 40% owned by the said Taiko Franchise Co., Ltd. On April 24, 1982, your corporation declared cash dividends equivalent to 50% of the par value of the capital stock of the corporation. Paragraph 2 of Article 10 of the RP-Japan Tax Treaty reads as follows: "However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident, and according to the laws of that Contracting State, but if the recipient is the beneficial owner of the dividends the tax so charged shall not exceed: (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 payments of the dividends; (b) 25% percent of the gross amount of the dividends in all other cases. The provisions of these paragraph shall not affect the taxation of the company in respect to the profits out of which the dividends are paid." Considering that the shares of Taiko Franchise Co., Ltd., in your company meets the ownership and holding requirements of the above-mentioned treaty, dividends issued to the said Taiko Franchise Co., Ltd., is subject to 10% withholding tax. The tax is without any of the qualifications mentioned in your letter. Since the tax withheld on such dividends was 15% as shown by RTR No. 9585492 and CBP confirmation Receipt No. 10364227, both dated June 29, 1982, Taiko Franchise Co., Ltd. or its representative may file the necessary request for the refund of the 5% excess thereof with our Office. aisadc Very truly yours, RUBEN B. ANCHETA Acting Commissioner