BIR Ruling [UN-009-95]

January 4, 1995 BIR RULING [UN-009-95] Sycip, Gorres, Velayo & Co. Philamlife Building Jones Avenue, Cebu City Attention: Mr . Lauris L . dela Pea Tax Division Gentlemen : This refers to your letter dated November 3, 1994 stating that your client, NEC Technologies Philippines, Inc. (NTEP), is a wholly owned subsidiary of NEC Corporation; that NTEP is a domestic corporation with principal office at the Mactan Export Processing Zone, Lapu-lapu City; that NEC Corporation is a non-resident foreign corporation organized and existing under the laws of Japan with principal address at 33-1, Shiba 5-chome, Minato-ku, Tokyo 108, Japan; that as of September 16, 1994, NEC Corporation's shareholdings in NTEP constitute 100% of the total subscribed and issued capital stock of NTEP; that on September 16, 1994, NTEP declared cash dividends to its stockholders of records as of September 30, 1994 amounting to P24,500,000; and that of the said dividend declaration, NEC Corporation's share is the total cash dividends declared. cdtech In support of your representations, you have submitted to this Office the following documents: 1. BIR application form TC-001; 2. Secretary's Certificate stating the number and value of the shares of NEC Corporation and the percentage of its ownership in NTEP as of September 16, 1994; 3. Copy of the Board Resolution approving declaration of dividends dated September 16, 1994; 4. Original copy of the Special Power of Attorney executed by NEC Corporation authorizing NTEP to file a request for tax relief application; 5. Securities and Exchange Commission's certification of non-registration of NEC Corporation of Japan. You now request for a ruling confirming your opinion that the remittance of cash dividends by NTEP in favor of NEC Corporation of Japan is subject to 10% withholding tax pursuant to Article 10 (2) (a) of the RP-Japan Tax Treaty. In reply, please be informed that under Article 10 (2) (a) of the RP Japan Tax Treaty, the tax on dividends is 10% of the gross amount of the dividends if the beneficial owner is a Company which holds directly at least 25% 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. In view of the foregoing and since NEC Corporation holds 100% of the shares of stocks of NTEP, your opinion that the remittance of cash dividends in the amount of P24,500,000 by NTEP to NEC Corporation are subject to 10% withholding tax on the gross amount thereof is hereby confirmed. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation it will be disclosed that the facts are different, then this ruling shall be considered null and void. (BIR Rulings No. 087 dated May 17, 1983 and BIR Ruling No. 293-94 dated October 17, 1994). Very truly yours, ALICE P. CLEMENO Assistant Commissioner (Legal Service)