BIR Ruling No. 333-13

August 30, 2013 BIR RULING NO. 333-13 Section 28 (B) (5) (b) of the Tax Code of 1997, as amended; BIR Ruling No. 131-2013; BIR Ruling No. 114-2013 Manabat Sanagustin & Co. The KPMG Center, 9/F 6787 Ayala Avenue Makati City 1226 Attention: Herminigildo G. Murakami Principal, Tax & Corporate Services Gentlemen : This refers to your letter dated November 5, 2010, requesting on behalf of your client, FRITEX PTY LIMITED ("FRITEX" for brevity), for the confirmation of your opinion that the cash dividends paid by SG Holdings, Inc. to FRITEX based on its Board of Directors meeting held on October 21, 2010 declaring cash dividends to the stockholders of record as of October 22, 2010 and paid on October 29, 2010, are subject to the preferential rate of 15% pursuant to section 28 (B) (5) (b) of the 1997 Tax Code, as amended. It is represented that FRITEX is a corporation organized and existing under the laws of Australia with principal address at Level 12, 160 Sussex St., New South Wales, Australia; that it is not registered either as a corporation or as a partnership and has not been licensed to do business in the Philippines; and that SG Holdings, Inc. is a domestic corporation with principal address at the 7th Floor, PhilFirst Building, 6764 Ayala Avenue, Makati City. It is further represented that FRITEX is the registered owner of 159,998 voting preferred shares, with par value of Php10.00 per share and representing 39.4083% outstanding shares of SG Holdings, Inc.; that on October 21, 2010, the Board of Directors of SG Holdings, Inc. declared cash dividends of Php32,100,000.00 out of its retained earnings to the stockholders of record as of October 22, 2010; and that as per dividend declaration on October 21, 2010, the total amount of Php12,336,000.00 was declared in favor of FRITEX and was paid on October 29, 2010. TEcAHI Based on the foregoing, you now request for the confirmation of your opinion that the cash dividends in the amount of Php12,336,000.00 of Php32,100,000.00 out of the retained earnings to be paid by SG Holdings, Inc. to FRITEX based on its Board of Directors meeting on October 21, 2010 declaring cash dividends to the stockholders of record as of October 22, 2010 and paid on October 29, 2010, are subject to the preferential rate of 15% pursuant to Section 28 (B) (5) (b) of the 1997 Tax Code, as amended. In support of your request, you submitted the following documents: 1) Letter request for tax exemption; 2) Original copy of Certification of Non-Registration of Company dated December 22, 2010 issued by the Securities and Exchange Commission; 3) Certified true copy of Certificate Numbers 06 & 13 issued by SG Holdings, Inc. to FRITEX; 4) Sworn Statement dated January 2, 2012 of Herminigildo G. Murakami; and 5) Secretary's Certificates dated October 25, 2012. In reply please be informed that Section 28 (B) (5) (b) of the Tax Code of 1997, as amended, provides that "Sec. 28. Rates of Income Tax on Foreign Corporations . CaASIc xxx xxx xxx (B) Tax on Nonresident Foreign Corporation . xxx xxx xxx (5) Tax on Certain Incomes Received by a Nonresident Foreign Corporation . xxx xxx xxx (b) Intercorporate Dividends . A final withholding tax at the rate of fifteen percent (15%) is hereby imposed on the amount of cash and/or property dividends received from a domestic corporation, which shall be collected and paid as provided in Section 57(A) of this Code, subject to the condition that the country in which the nonresident foreign corporation 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 twenty percent (20%), which represents the difference between the regular income tax of thirty-five percent (35%) and the fifteen (15%) tax on dividends as provided in this subparagraph: Provided, that effective January 1, 2009 the credit against the tax due shall be equivalent to fifteen percent (15%), which represents the difference between the regular income tax of thirty percent (30%) and the fifteen percent (15%) tax on dividends;" Prescinding from the above-cited provisions, it is undisputed that dividends received by non-resident foreign corporations from a domestic corporation shall be subject to a withholding tax of 15% of the dividends received subject to the condition that the country in which the non-resident foreign corporation 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%) on corporations and the tax (15%) on dividends. Thus, if the country of domicile of the recipient corporation allows as credit against the tax imposable by it an amount equivalent to 20% of the dividends remitted to corporations domiciled therein, the dividends so remitted are subject to a withholding tax at the rate of 15% only. In BIR Ruling No. 131-2013 dated April 4, 2013 , this Office confirmed that the cash dividends paid to Waughcal Pty. Ltd., a company organized and existing under the laws of Australia, by Morray Holdings, Inc. in the amount of Php24,592,000.00 and paid on October 29, 2010, are subject to 15% final withholding tax provided under the 1997 Tax Code, as amended. SacDIE Moreover, under Section 23AJ of the Income Tax Assessment Act of 1936 of Australia, foreign dividends received in Australia are no longer included as taxable income but are treated as exempt, in which case then, no Philippine-sourced dividend income will be subject to tax in Australia against which a tax rebate may be claimed. (BIR Ruling No. 114-2013 dated March 22, 2013 and BIR Ruling No. 131-2013 dated April 4, 2013) Based on the foregoing, we confirm your opinion that the cash dividends paid to FRITEX, a company organized and existing under the laws of Australia, by SG Holdings, Inc. based on its Board of Directors Resolution dated October 21, 2010 declaring cash dividends to the stockholders of record as of October 22, 2010 and paid on October 29, 2010, are subject to preferential rate of 15% pursuant to Section 28 (B) (5) (b) of the Tax Code of 1997, as amended. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue