DA ITAD BIR Ruling No. 058-08

August 11, 2008 DA ITAD BIR RULING NO. 058-08 Article 10, Philippines-Singapore tax treaty; BIR Ruling No. DA-ITAD-026-06 Sycip Gorres Velayo & Co. 6760 Ayala Avenue 1226 Makati City, Philippines Attention: Mark Anthony P. Tamayo Partner, Tax & Customs Services Gentlemen : This refers to your application for relief from double taxation dated August 21, 2007, on behalf of your client, ROHM Electronics (Philippines) Sales Corporation (ROHM Sales), requesting confirmation of your opinion that the dividend payments made by ROHM Sales to its parent company in Singapore, ROHM Electronics Asia Pte. Ltd. (ROHM Asia) are subject to the preferential tax rate of 15% pursuant to Article 10 of the Philippines-Singapore tax treaty. IDSETA It is represented that ROHM Asia is a non-resident foreign corporation duly organized and existing under the laws of Singapore, with office address at 9 Temasek Blvd. #20-02 Singapore 038989 as evidenced by a Certificate of Residence for the Purpose of Claiming Benefit Under the Singapore/Philippines Double Taxation Agreement for dividend income; that it is not registered either as a corporation or as a partnership in the Philippines per Certification issued by the Securities and Exchange Commission dated July 31, 2007; that ROHM Sales is a corporation duly organized and existing under and by virtue of the laws of the Philippines with its principal place of business at Unit 4B Citibank-Frabelle Building, Block 2, Lot 2, Phase III, Madrigal Business Park, Alabang-Zapote Road, Ayala Alabang, Muntinlupa City. It is further represented that from 1996 to present, ROHM Asia owns Twenty Six Thousand Four Hundred Ninety Five (26,495) shares in ROHM Sales, with par value of Five Hundred Pesos (P500.00) each share or a total par value of Thirteen Million Two Hundred Forty Seven Thousand Five Hundred Pesos (P13,247,500.00) constituting 99.98% of the total issued and outstanding shares of ROHM Sales, per Secretary's Certificate dated November 12, 2007 of ROHM Sales' Corporate Secretary; that on June 6, 2007, per Corporate Secretary's Certificate dated July 13, 2007, the Board of Directors of ROHM Sales authorized the declaration of cash dividends in the total amount of Ten Million Eighty Six Thousand and Twenty Nine Pesos (P10,086,029) to be distributed proportionately among all stockholders of record of ROHM Sales in accordance with their respective stockholdings as of March 31, 2007; and that the issue/s or transaction subject of the above request for ruling is not under investigation, on-going audit, administrative protest, claim for refund or issuance of a tax credit certificate, collection proceedings, or a judicial appeal of the taxpayer/s involved. In reply, please be informed that Article 10 of the Philippines-Singapore tax treaty provides as follows, viz. : "Article 10 Dividends 1. Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State. 2. However, such dividends may be taxed in the Contracting State of which the company paying the dividends is a resident, and according to the law of that State, but if the recipient is the beneficial owner of the dividends the tax so charged shall not exceed: a) 15 per cent of the gross amount of the dividends if the recipient is a company (including partnership) and during the part of the paying company's taxable year which precedes the date of payment of the dividend and during the whole of its prior taxable year (if any), at least 15 per cent of the outstanding shares of the voting stock of the paying company was owned by the recipient company; and b) in all other cases, 25 per cent of the gross amount of the dividends. xxx xxx xxx 4. The term 'dividends' as used in this Article means income from shares, 'jouissance' shares or 'jouissance' rights, mining shares, founder's shares or other rights, not being debt-claims, participating in profits, as well as income assimilated to income from shares by the taxation law of the State of which the company making the distribution is a resident. AaIDHS xxx xxx xxx" Based on the aforequoted provisions, the 15% preferential tax rate on dividends applies whether the beneficial owner/recipient of the dividends owns at least 15% of the outstanding voting shares of the paying company, which fifteen percent (15%) shareholdings should have existed during the part of the paying company's taxable year immediately preceding the date of payment of the dividends and during the whole of its prior taxable year, if any. Since ROHM Asia owns 99.98% of the total issued and outstanding shares of ROHM Sales during the part of the latter's taxable year which precedes the payment of dividends and the whole of its prior taxable year, dividends received by ROHM Asia shall be subject to the preferential tax rate of 15%, pursuant to Article 10 (2) (a) of the Philippines-Singapore tax treaty. (BIR Ruling No. DA-ITAD-26-06 dated March 16, 2006) This ruling is issued based on the facts as represented. However, if upon investigation it shall be disclosed that the actual facts are different, then this ruling shall be without force and effect insofar as the herein parties are concerned. Very truly yours, Commissioner of Internal Revenue By: (SGD.) GREGORIO V. CABANTAC Deputy Commissioner