Basic Rules Governing Remittance of Dividends and Profits at the free Market Rate

January 24, 1961 CBP MEMORANDUM TO : Authorized Agents ECD No. 32-61 BASIC RULES GOVERNING REMITTANCE OF DIVIDENDS AND PROFITS AT THE FREE MARKET RATE 1. Authorized Agents may license the remittance to nonresident investors at the free market rate, under the provisions of Central Bank Circular No. 106 dated April 25, 1960, of profits and dividends declared out of profits earned beginning January 1, 1960, on their approved foreign capital investments in the Philippines, provided the application and their supporting documents are filed with the Authorized Agents concerned within nine (9) months from the end of the fiscal year during which the profits to be remitted were earned. LLjur 2. For the purpose of this memorandum, the following are approved foreign capital investments: a) Shares of stock in pre-December 9, 1949 Philippine companies belonging to nonresidents which were in nonresident status as of December 9, 1949, and which have been held continuously by the same nonresident stockholders up to the date of the application, or were acquired by the nonresident stockholders to whom cash dividends are to be remitted by transfer effected abroad from the previous non-resident stockholders. b) Shares of stock in pre-December 9, 1949 Philippine companies which were granted nonresident status by the Central Bank after December 9, 1949, and which have been held continuously by the same nonresident stockholders since the date of their exportation, or were subsequently transferred to the nonresident stockholders to whom the dividends are to be remitted by transfer from previous nonresident stockholders effected abroad. If the subsequent transfer to the nonresident stockholders to whom remittance of cash dividends is applied for was effected in the Philippines, such transfer must have been covered by license issued by the Exchange Control Department or by an authorized security dealer on behalf of the Exchange Control Department with privilege of dividend remittance. c) Shares of stock in pre-December 9, 1949 Philippine companies which were acquired by the present nonresident stockholders after December 9, 1949, under licenses issued by the Exchange Control Department or by an authorized security dealer on behalf of the Exchange Control Department, and which were granted nonresident status by the Exchange Control Department subsequent to the date of this memorandum; d) Shares of stock owned by nonresident stockholders in Philippine companies established after December 9, 1949, which were issued against foreign capital investments in said companies approved by the Central Bank and recognized as capital base for remittance of dividends, or were covered by licenses issued by the Exchange Control Department or by an authorized security dealer on behalf of the Exchange Control Department with privilege of dividend remittance; e) Foreign capital investments in branch offices in the Philippines of foreign companies which have been existing continuously since before December 9, 1949, and in branch offices of foreign companies in the Philippines which were established after December 9, 1949, with the approval of the Central Bank. LLjur f) Investments of nonresidents in pre-December 9, 1949 Philippine partnerships which have been held continuously by the same nonresidents up to the date of the application to remit profits or which have been acquired by the nonresident partners to whom the profits are to be remitted from the previous nonresident partners with the approval of the Central Bank; and g) Investments of nonresidents in partnerships established in the Philippines after December 9, 1949, with the approval of the Central Bank and which have been recognized as capital base for remittance of partnership profits. 3. Remittance of Dividends: a) Applications of Philippine companies to remit cash dividends to nonresident stockholders on their approved foreign capital investments shall be accompanied by: i) A complete list of the applicant company's nonresident stockholders to whom the dividends are to be remitted, with their corresponding addresses, the number and value of the shares held by each, the amount of dividend payable to each stockholder, less withholding tax, foreign exchange margin under Central Bank Circular No. 95, as amended, and other expenses of the remittance chargeable to the nonresident dividend recipients, duly certified by the Treasurer of the applicant-company; ii) True copies of the resolution of the Board of Directors of the applicant-company declaring the cash dividend involved, certified by the Secretary of the company concerned; iii) Detailed balance sheet, profit and loss and surplus statements of the applicant-company for the year for which the cash dividend was declared, duly certified by a licensed independent Certified Public Accountant; iv) Statement of percentage of the approved foreign capital investments of the nonresident stockholders to whom the cash dividends are to be remitted in the paid-up capital of the applicant-company; v) List of nonresident stockholders to whom cash dividends were licensed for remittance by the Exchange Control Department out of 1959 profits, showing the names and addresses of said stockholders and the number and value of their shares in the company in which the dividends were remitted; vi) Certified true copies of the income tax returns of the applicant-company for the year for which the cash dividends were declared. b The limit of the amount of cash dividends to be remitted to the nonresident stockholders shall be the participation of their approved foreign capital investments in the annual net profit out of which the dividend was declared, less withholding tax, the foreign exchange margin prescribed in Central Bank Circular No. 95, as amended, and other expenses of the nonresident recipient; LLjur c) If the cash dividends to be remitted were declared during the fiscal year, the application should be accompanied by the supporting documents listed in paragraph 3(a) (i), (ii), (iv) and (v) above, and in lieu of the audited balance sheet and profit and loss and surplus statements, interim financial statements duly certified by the applicant-company's Treasurer or Comptroller may be submitted. The amount of the interim dividend to be remitted shall not exceed the participation of the approved foreign capital investment of the nonresident stockholders to whom the dividend is to be remitted in the interim net profit of the applicant-company out of which the said dividend was declared, less withholding tax, the foreign exchange margin and other expenses of the remittance chargeable to nonresident dividend recipients; d) The remittance of interim dividend shall be made with the understanding that at the end of the fiscal year, the company shall furnish the agent bank with balance sheets, profit and loss and surplus statements duly certified by a licensed independent Certified Public Accountant and the company's income tax returns for the fiscal year involved. All interim dividends already remitted shall be subject to adjustment at the end of the fiscal year, and any excess remittance shall be deducted from the next succeeding dividend remittances; e) Cash dividends due on the stockholdings in the Philippines of the deceased stockholders may be licensed for remittance subject to the limitations and conditions stated above, provided the transfer taxes due on the estates of the deceased stockholder shall have been paid in full to the Bureau of Internal Revenue and, provided further, that only the cash dividend due on the participation of the nonresident heirs or legatees of the deceased stockholder are remitted. If the estate of the deceased stockholder has not been settled, the remittance of the cash dividend to the executor or administrator, shall be cleared with the Exchange Control Department. 4. Remittance of Branch Profits: a) Applications of Philippine branches of foreign companies to remit profits earned after January 1, 1960 to their Head Office abroad shall be accompanied by the following: i) Audited balance sheet and profit and loss statement certified by a licensed independent Certified Public Accountant; ii) Auditor's statement indicating portion of the annual net profit due to the nonresident investors on their approved capital investments; LLjur iii) Income tax returns of the applicant-company for the fiscal year for which the profits are being remitted. b) The amount to be remitted shall not exceed the participation in the annual net profit of the approved foreign capital investment, less foreign exchange margin and other expenses of the remittance chargeable to nonresident investors; c) If interim profits are to be remitted, interim balance sheet and profit and loss statement duly certified by the branch manager may be submitted in lieu of the audited balance sheet and profit and loss statement. But at the end of the fiscal year, the branch manager shall furnish the agent bank these financial statements duly certified by a licensed independent Certified Public Accountant together with a certified copy of the company's income tax returns for said year. The amount of interim profits already remitted shall be subject to adjustment at the end of the fiscal year and any excess remittance shall be deducted from the next succeeding profit remittance. 5. Remittance of Partnership Profits: a) Applications of Philippine partnerships to remit profits to nonresident partners on their approved capital investment shall be accompanied by the following: i) Balance sheet and profit and loss statement and statement of partners' drawings during the fiscal year, duly certified by a licensed independent Certified Public Accountant; ii) Auditor's statement of the portion of the profits due to nonresident partners on their approved capital investment; iii) Income tax return for the fiscal year for which the profits are being remitted. b) The amount of partnership profit to be remitted to the nonresident partners shall not exceed the participation of the said partners in the net distributable profit corresponding to their approved capital investments after deducting their respective drawings during the year, withholding income tax, the foreign exchange margin under Central Bank Circular No. 95, as amended, and other expenses of the remittance chargeable to the nonresident partners. c) If interim partnership profits are to be remitted, the application shall be accompanied, in lieu of the above documents, with interim balance sheet, profit and loss statement, and statement of the interim drawings by the nonresident partners duly certified by the managing partner. The amount to be remitted shall not exceed the participation of the nonresident partners in the distributable interim net profit corresponding to their approved capital investment, less the interim drawings, withholding tax, the foreign exchange margin under Central Bank Circular No. 95, as amended, and other expenses of the remittance chargeable to the nonresident partners. d) At the end of the fiscal year, balance sheet, profit and loss statement, statement of distributable net profits and statements of partners drawings, during said fiscal year, all certified by a licensed independent Certified Public Accountant, and certified copies of the nonresident partners' income tax returns for said year, shall be submitted to the authorized agent bank concerned. Interim profit remittances shall be adjusted at the end of the fiscal year and any excess remittance shall be deducted from the next succeeding profit remittances. 6. Nothing in this memorandum shall be construed as allowing the remittance directly or indirectly of foreign exchange to any territory occupied by the Peoples Republic of China or to any resident of such territory. LLjur 7. In case of doubt as to whether the foreign capital investment of the nonresident investor on which remittance of profit or dividend is applied for has been approved by the Central Bank or as to the amount of profits or dividends to be remitted, the matter shall be referred to the Exchange Control Department for clarification. 8. Authorized Agents shall submit to the Exchange Control Department at the end of each semester a report of the remittances of profit or dividend licensed by them during such semester, containing the following data by company: a) The paid up capital of the company and the percentage of the approved nonresident foreign capital investment in such paid up capital; b) The total amount of profits or dividends remitted during the period; c) The total amount of net profit out of which the remittances was made and the period during which such profit was earned. (SGD.) ANDRES V. CASTILLO Acting Governor