DA ITAD BIR Ruling No. 100-06

August 25, 2006 DA ITAD BIR RULING NO. 100-06 Article 10, Philippines-Netherlands tax treaty; BIR Ruling No. ITAD-028-99 Transitions Optical Phils., Inc. Block 4 Lot 1 Star Avenue, Laguna International Industrial Park Mamplasan, Bian Laguna 4024 Attention: Suzanne B. Mondoedo Finance Director (Asia Pacific) Gentlemen/Ladies : This refers to your application for relief from double taxation dated November 10, 2005, requesting confirmation of your opinion that the payment of dividends by Transitions Optical Phils., Inc. (TOPI) to Transitions Optical Holdings BV (TOH) is subject to final withholding tax at the preferential tax rate of 10 percent, pursuant to Article 10(2) of the Philippines-Netherlands tax treaty. It is represented that TOH is a nonresident corporation duly organized and existing under the laws of the Netherlands with principal office at Rijkaweg West 22, 9608 PC, Werterbroek, The Netherlands; that TOH is a resident of The Netherlands within the meaning of Article 4 of the Convention for the Avoidance of Double Taxable Between the Netherlands and the Republic of the Philippines (Philippines-Netherlands tax treaty) per Declaration of Residence dated 8 November 2005 issued by the Inspector of the Tax Administration Noord/kantoor Groningen Engelse Kamp, the Netherlands; that it is not registered either as a corporation or a partnership in the Philippines per Certification dated 9 November 2005 issued by the Securities and Exchange Commission; that TOPI is a corporation duly organized and existing under and by virtue of the laws of the Philippines with business address at Block 4 Lot 1 Star Avenue, Laguna International Park, Mamplasan, Bian, Laguna 4024; and that it is engaged in the manufacturing, distribution, selling and export (without, however, engaging in retail trade) of photochromic ophthalmic lenses. It is further represented that on 10 November 2005, TOPI's Board of Directors declared a cash dividend out of its retained earnings amounting to US$5,000,000,000, to its stockholders of record as of 10 November 2005, payable on 25 November 2005; that as of 10 November 2005, TOH is the registered owner of the 99.99% of the subscribed/outstanding capital stock of TOPI; and that the issue/s or transaction subject of the above request is not under investigation, neither is it subject of an on-going audit, administrative protest, claim for refund or issuance of a tax credit certificate, collection proceedings nor a judicial appeal. EacHCD In reply, please be informed that Article 10 of the Philippines-Netherlands tax treaty provides as follows: "Article 10 DIVIDENDS 1. Dividends paid by a company which is a resident of one of the States to a resident of the other State may be taxed in that other State. 2. However, such dividends may also be taxed in the State of which the company paying the dividends is a resident and according to the laws of that 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 recipient is a company the capital of which is wholly or partly divided into shares and which holds directly at least 10 per cent of the capital of the company paying the dividends; b) 15 per cent of the gross amount of the dividends in all other cases. xxx xxx xxx 5. The term 'dividends' as used in this Article means income from shares, 'jouissance' shares or jouissance' rights, mining shares, founders' shares or other rights participating in profits, as well as income from debt-claims participating in profits and income from other corporate rights which is subjected to the same taxation treatment as income from shares by the taxation law of the State of which the company making the distribution is a resident. xxx xxx xxx" Accordingly, your opinion that the cash dividends declared by TOPI in favor of TOH is subject to the 10 percent preferential tax rate, pursuant to the Philippines-Netherlands tax treaty, is hereby confirmed considering that recipient TOH is a beneficial owner of the dividends which holds directly 99.99% of the outstanding capital stock of TOPI. ( BIR Ruling No. 028-99 ) This ruling is issued on the basis of the foregoing facts as represented. However, if upon investigation it shall be disclosed that the facts are different, then this ruling shall be without force and effect insofar as the herein parties are concerned. Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service