ITAD BIR Ruling No. 060-12

February 15, 2012 ITAD BIR RULING NO. 060-12 San Roque Power Corporation 36th Floor, Tower 1 The Enterprise Center 6766 Ayala Avenue, Makati City Attention: Carlos M. Echevarria Vice President, Treasurer and Chief Finance Officer Gentlemen : This refers to your tax treaty relief application ("TTRA") filed on July 14, 2011 requesting confirmation that dividends paid by San Roque Power Corporation ("San Roque Power") to KPIC Netherlands BV ("KPIC Netherlands") are subject to income tax at the rate of 10 percent pursuant to the Convention between the Kingdom of the Netherlands and the Republic of the Philippines for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income. KPIC Netherlands is a foreign corporation organized and existing under the laws of the Netherlands and is a resident thereof based on its Deed of Incorporation and on the Declaration of Residence issued by the Tax and Customs Administration of the Netherlands on June 17, 2011. KPIC Netherlands is situated at Strawinskylaan 3105, 1077 ZX Amsterdam, the Netherlands. KPIC Netherlands is not registered as a corporation or partnership in the Philippines based on the Certification of Non-Registration of Company issued by the Securities and Exchange Commission on June 27, 2011. On the other hand, San Roque Power is a domestic corporation situated at 36th Floor, Tower 1, The Enterprise Center, 6766 Ayala Avenue, Makati City (Administration Office), and at Barangay San Roque, San Manuel, Pangasinan, in the Philippines. Based on the Certificate issued by the Corporate Secretary of San Roque Power on July 14, 2011, the Board of Directors of San Roque Power, at its special meeting on July 14, 2011, declared cash dividends of 2,279,908,324.00 (1,209.93 per share of stock) in favor of the corporation's stockholders of record as of that date. The dividends were payable on the same date. As of this date, KPIC Netherlands holds 1,000 common shares and 941,162 preferred shares of San Roque Power, respectively valued at P3,525,000.00 and P3,317,596,050.00, and which represent 50 percent of the total capital of San Roque Power. caTIDE Relative thereto, please be informed that under Section 14 of Revenue Memorandum Order No. 72-2010 (Guidelines on the Processing Tax Treaty Relief Applications (TTRA) Pursuant to Existing Philippine Tax Treaties) ("RMO 72-2010"), effective November 4, 2010, any availment of tax treaty relief (exemption from income tax or reduction of tax) shall be preceded by an application filed at the International Tax Affairs Division of this Bureau before the intended transaction or payment of income, to wit: "Filing should always be made BEFORE the transaction. Transaction for purposes of filing the TTRA shall mean before the occurrence of the first taxable event. Failure to properly file the TTRA with ITAD within the period prescribed herein shall have the effect of disqualifying the TTRA under this RMO." In view of the foregoing, since the dividends were paid by San Roque Power to KPIC Netherlands on July 14, 2011, and the subject TTRA was also filed on that date, this Office hereby DENIES the TTRA for being filed beyond the prescribed date of filing under RMO 72-2010. Consequently, said dividends shall be subject to income tax at the rate of 30 percent under Section 28 (B) (1) of the National Internal Revenue Code, as amended, to wit: "SEC. 28. Rates of Income Tax on Foreign Corporations. xxx xxx xxx (B) Tax on Nonresident Foreign Corporation . (1) In General. Except as otherwise provided in this Code, a foreign corporation not engaged in trade or business in the Philippines shall pay a tax equal to thirty-five percent (35%) of the gross income received during each taxable year from all sources within the Philippines, such as interests, dividends, rents, royalties, salaries, premiums (except reinsurance premiums), annuities, emoluments or other fixed or determinable annual, periodic or casual gains, profits and income, and capital gains, except capital gains subject to tax under subparagraph 5(c) and (d) above: Provided, That effective January 1, 2009, the rate of income tax shall be thirty percent (30%)." Please be guided accordingly. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue