DA ITAD BIR Ruling No. 094-07

September 24, 2007 DA ITAD BIR RULING NO. 094-07 Article 10 of the Philippines-Japan tax treaty; ITAD Ruling No. 008-99 Gramata & Associates Law Office 2nd Floor, FCC Building 7494 Santillan Street 1230 Makati City Attention: Atty. Delfin N. Gramata Gentlemen : This refers to your letter dated June 8, 2006, on behalf of your client Nissin Precision Philippines Corporation (Nissin Philippines), requesting confirmation that the dividends to be received by Nissin Precision Machines Co. Ltd. (Nissin Japan) from Nissin Philippines is subject to 10% preferential tax rate pursuant to Article 10 of the Philippines-Japan tax treaty. It is represented that Nissin Japan is a corporation organized and existing under the laws of Japan with principal address at 29-21 Tamagawa 2-Chome, Ohta-ku, Tokyo, Japan; 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 April 21, 2006; that Nissin Philippines is a corporation organized and existing under the laws of the Philippines with principal address at Lot-15A, First Philippine Industrial Park, Sto. Tomas, Batangas; that Nissin Japan is a major stockholder of Nissin Philippines with a shareholding of 99.987% or 39,995 shares with a par value of One Thousand Pesos (P1,000.00) per share acquired since November 21, 2001; that per certification dated September 2, 2006 issued by the Corporate Secretary of Nissin Philippines, from November 21, 2001, and during the period of more than six (6) months immediately prior to the date of declaration and payment of the cash dividends on June 1, 2006 and on June 21, 2006, respectively, there were no changes which took place in the percentage shareholdings of Nissin Japan; that the issue or transaction subject of this request for ruling is not under investigation, on-going audit, administrative protest, claims for refund or issuance of a tax credit certificate, collection proceedings, or judicial appeal. In reply, please be informed that Article 10 of the Philippines-Japan tax treaty provides as follows: cASIED "Article 10 "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 Contracting State. "2. 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 per cent of the gross amount of the dividends if the beneficial owner is a company which holds directly at least 25 per cent 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; b) 25 per cent of the gross amount of the dividends in all other cases. "xxx xxx xxx" "4. The term 'dividends' as used in this Article means income from shares or other rights, not being debt-claims, participating in profits, as well as income from other corporate rights assimilated to income from shares by the taxation laws of the Contracting State of which the company making the distribution is a resident. "xxx xxx xxx" Based on the aforequoted provisions, the Philippines may tax the dividends paid by a company which is a resident thereof to a company which is a resident of Japan at a rate not exceeding 10 percent if the last-mentioned company holds directly at least 25 percent of the voting shares or of the total shares of the first-mentioned company for a period of six months immediately preceding the date of payment of the dividends. AIHaCc In view thereof and considering that Nissin Japan is a major stockholder of Nissin Philippines with a shareholding of 99.987% for a period of six months immediately preceding the date of payment, said dividends paid by Nissin Philippines to Nissin Japan are subject to 10 percent preferential tax rate, pursuant to the Philippines-Japan tax treaty. (ITAD Ruling No. 008-99 dated July 20, 1999) This ruling is issued on the basis of the foregoing 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