ITAD BIR Ruling No. 077-12

February 16, 2012 ITAD BIR RULING NO. 077-12 Article 10, Philippines-Japan tax treaty, as amended; BIR Ruling No. ITAD 007-10 Sumisetsu Philippines, Inc. Electrical & Mechanical Contractor 8th Floor, G.C. Corporate Plaza 150 Legaspi St., Legaspi Village Makati City 1229 Attention: Atty. Marilou I. Ababa-Premediles Representative Gentlemen : This refers to your Tax Treaty Relief Application (TTRA) filed on December 5, 2011, requesting confirmation that the dividends paid by Sumisetsu Philippines, Inc. ("Sumisetsu") to Sumitomo Densetsu Co., Ltd. ("Sumitomo") are subject to the preferential tax treaty rate of 10 percent pursuant to the Convention between the Republic of the Philippines and Japan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income ("Philippines-Japan tax treaty"), as amended. It is represented that Sumitomo is a foreign corporation organized and existing under the laws of Japan with principal office at 2-1-4 Awaza, Nishi-ku, Osaka-shi, 550-8550, Japan based on the Residence Certificate issued by the District Director of Nishi Tax Office dated August 4, 2011; that it 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 September 20, 2011; and that, on the other hand, Sumisetsu is a corporation duly organized and existing under the laws of the Philippines with office address at 8th Floor, G.C. Corporate Plaza, 150 Legaspi St., Legaspi Village, Makati City 1229. It is further represented, that at the meeting of the Board of Directors of Sumisetsu held on September 26, 2011, a resolution was passed and approved declaring cash dividends in the total amount of Five Million Seven Hundred Fifty One Thousand Pesos (P5,751,000.00) from Sumisetsu' s unrestricted retained earnings as of August 31, 2011, payable on September 26, 2011 ; that per the Corporate Secretary's Certificate issued by Sumisetsu dated November 28, 2011, through various subscription beginning February 4, 1991 at until the September 28, 2011, Sumitomo holds 2,000 common shares with a par value of P2,000,000.00 constituting 40% of the common shares and 2,300 Redeemable Preferred shares of Sumisetsu. EacHSA In reply, please be informed that Section 14 of Revenue Memorandum Order ("RMO") No. 72-2010 , 1 which was published in the Manila Bulletin on October 20, 2010 and effective November 4, 2010, provides that: "SEC. 14. When and Where to File the TTRA. All tax treaty relief applications (updated BIR Forms No. 0901-D, 0901-I, 0901-R, 0901-P, 0901-S, 0901-T, 0901-O and 0901-C) relative to the implementation and interpretation of the provisions of Philippine tax treaties shall only be submitted to and received by the International Tax Affairs Divisions (ITAD). If the forms of any necessary documents are submitted to any other BIR office, the application shall be considered as improperly filed. 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." (Emphasis supplied) In view of the foregoing, since the payment of the subject dividends was made on September 26, 2011, and the TTRA was filed only on December 5, 2011 , this Office hereby DENIES the TTRA for having been filed beyond period prescribed by the RMO. Accordingly, the subject dividends shall be subject to income tax at the rate of 30 percent as provided under Section 28 (B) (1) of the 1997 National Internal Revenue Code, as amended. Please be guided accordingly. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue Footnotes 1. Guidelines on the Processing of Tax Treaty Relief Applications ("TTRA") pursuant to existing Philippines Tax Treaties dated August 25, 2010.