ITAD BIR Ruling No. 212-12

May 28, 2012 ITAD BIR RULING NO. 212-12 Article 10, Philippines-Japan tax treaty, as amended; BIR Ruling No. ITAD 007-10 San Miguel Brewery Inc. 5th Floor, SMC Head Office Complex No. 40 San Miguel Avenue Mandaluyong City Attention: Kosuke Nagasato Senior Consultant, Finance Gentlemen : This refers to your Tax Treaty Relief Application ("TTRA") filed on October 10, 2011, requesting confirmation that the dividend payments by San Miguel Brewery Inc. ("San Miguel") to KIRIN Holdings Limited ("KIRIN") are subject to 10 percent preferential tax rate, pursuant to Article 10 of the amended 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 KIRIN, with address at 10-1, Shinkawa, 2-chome, Chou-ku, Tokyo, Japan 104-8288, is a corporation organized and existing under the laws of Japan, and is a resident of Japan within the meaning of the Philippines-Japan tax treaty per the Application for Residency Certification issued by the District Director of Kyobashi Tax Office dated July 27, 2011; 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 August 31, 2011; and that, on the other hand, San Miguel is a corporation organized and existing under the laws of the Philippines, with principal address at 5th Floor, SMC Head Office Complex, No. 40 San Miguel Avenue, Mandaluyong City. It is further represented that at the meeting of the Board of Directors of San Miguel which was held on August 11, 2011, a resolution was passed and approved declaring cash dividends in the amount of P0.14 per share be paid on September 12, 2011 to all stockholders of record as of August 26, 2011, and such amounts as may be necessary therefor be appropriated out of unappropriated retained earnings; that the total amount of the dividend that has been declared was P2,157,467,054.40; that as of Record date and the Payment date of the subject dividend, KIRIN owns a total of 7,456,879,880 common shares with a par value of One Peso (P1.00) per share or P7,456,879,880.00 in San Miguel, including the 5,000 shares each held by its four nominee directors (or a total of 20,000 common shares), which corresponds 48.39% of the issued and outstanding shares of San Miguel as of Record date and Payment date; that the subject shares was acquired by KIRIN through various subscriptions beginning April 30, 2009. It is finally represented, per Certification dated October 10, 2011 issued by San Miguel, 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. IHCacT In reply, please be informed that Sections 14 and 13 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, provide that: "Section 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 Division (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 12, 2011 , and the TTRA was filed on October 10, 2011, this Office hereby DENIES the TTRA for having been filed beyond the occurrence of the first taxable event prescribed by the RMO. Accordingly, the subject dividends shall be subject to income tax at the rate of 30% 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.