DA ITAD BIR Ruling No. 117-07

December 6, 2007 DA ITAD BIR RULING NO. 117-07 Article 10, Philippines-Singapore tax treaty; BIR Ruling No. DA-ITAD-113-06 SyCip Gorres Velayo & Co. 6760 Ayala Avenue 1226 Makati City Attention: M. F. A. Balili Tax Services Gentlemen : This refers to your application for tax treaty relief dated 22 November 2006, on behalf of your client, ICCP Holdings, Inc. (IHI), formerly Investment & Capital Corporation of the Philippines, requesting confirmation of your opinion that the dividends declared and paid by IHI to DBS Bank Ltd. (DBS) are subject to the preferential tax rate of 15% pursuant to the Philippines-Singapore tax treaty. cCaSHA It is represented that DBS, formerly known as The Development Bank of Singapore, Limited, is a nonresident foreign corporation organized and existing under the laws of Singapore, as evidenced by its Memorandum and Articles of Incorporation, with registered office at 6 Shenton Way, DBS Building, Tower One, Singapore 068809; that according to the Certificate of Corporate Filing/Information dated 15 November 2006, DBS's license to transact business in the Philippines was cancelled per Certificate of Cancellation of License of a Foreign Corporation approved on 19 February 2001; that IHI is a corporation duly organized and existing under and by virtue of Philippine laws, with principal office address at 15/F PSBank Centre, 777 Paseo de Roxas, Makati City, Philippines. It is further represented that as of 30 September 2006 and 5 October 2006 DBS directly held 20% of the voting shares of IHI based on the list of stockholders of IHI and their respective shareholdings during the part of the Corporation's taxable year which precedes the date of payment of property dividend on 5 October 2006, and during the whole of IHI's prior taxable year as certified to by the Corporate Secretary on 20 July 2007; that during the meeting held on 5 October 2006, the Board of Directors of IHI declared property dividends consisting of 700,000 common shares in Investment & Capital Corporation of the Philippines (ICCP) in favor of all stockholders of record as of 30 September 2006; that IHI allocated the declaration of property dividends, consisting of Seven Hundred Thousand (700,000) common shares in ICCP as follows: Stockholder Number of Shares as of 5 Allocation of October 2006 (date of Property Dividends declaration of property (700,000) common dividends) and as of 30 shares in ICCP September 2006 (record date) The Philippine American 600,000 140,000 Life Insurance Co. DBS Bank Ltd. 600,000 140,000 (formerly known as "The Development Bank of Singapore Limited") BPI Capital Corporation 450,000 105,000 Abeto A. Uy 300,000 70,000 Frabelle Fishing 180,000 42,000 Corporation Dante G. Santos 150,000 35,000 Leonardo T. Siguion-Reyna 150,000 35,000 Manila Memorial Park 150,000 35,000 Cemetery, Inc. ICCP Managers, Inc. 300,000 70,000 Romarico G. Vitug 30,000 7,000 Antonio H. Sison 60,000 14,000 Manuel Bernabe 30,000 7,000 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: "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 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. IDTSaC xxx xxx xxx" Based on the aforequoted provisions, the 15% preferential tax rate on dividends applies whenever the beneficial owner/recipient of the dividends owns at least 15% percent of the outstanding shares of the voting stock 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 DBS held 20% percent of the total voting shares of IHI as of 30 September 2006 as evidenced by the Certification issued by IHI's Corporate Secretary, dividends received by DBS 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-113-06 dated 27 September, 2006) This ruling is issued on the basis of 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. caCEDA Very truly yours, Commissioner of Internal Revenue By: (SGD.) GREGORIO V. CABANTAC Deputy Commissioner