ITAD BIR Ruling No. 350-13

December 9, 2013 ITAD BIR RULING NO. 350-13 Article 10, Philippines-Japan Tax Treaty FCC (Philippines) Corporation 106 North Science Avenue Laguna Technopark, Bian, Laguna Attention: Koichi Kumagai President & General Manager Gentleman : This refers to your tax treaty relief application filed September 7, 2012, on behalf of F.C.C. Co., Ltd. ("FCCC") , for a confirmation that the cash dividend paid by FCC (Philippines) Corporation ("FCCP") to FCCC is subject to the preferential tax rate of 10 percent based on Article 10 (2) (a) of 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 FCCC, with office address at 7000-36 Nakagawa Hosoe-cho Kita-ku, Hamamatsu-shi, Shizuoka-ken 431-1394, Japan, is a corporation organized and existing under the laws of Japan and is a resident of Japan per Certificate of Status of Taxable Person issued by the Taxation Office in Shizuoka, Japan on August 21 2012; that FCCC is not registered either as a corporation or as a partnership in the Philippines as shown in the Certification of Non-Registration/Partnership issued by the Securities and Exchange Commission on September 6, 2012; that FCCP is a domestic corporation duly organized and existing under the laws of the Philippines with principal address located at 106 North Science Avenue, Laguna Technopark, Bian, Laguna; and that FCCP is registered with the Export Processing Zone Authority, now Philippine Economic Zone Authority (PEZA), with Certificate of Registration No. 93-55 issued on November 15, 1993. IcHEaA It is also represented, per Secretary's Certificate dated September 4, 2012, that as of March 31, 2012, FCCC owns 199,994 common shares with total subscribed amounting to Php199,994,000.00, representing 99.9970% ownership in FCCP; and that these shares were acquired on various dates starting November 15, 1999 upon by original issuance, and additional subscription of shares in FCCP. It is further represented that at the Organizational Meeting of the Board of Directors of FCCP on August 7, 2012, the Board approved and authorized the declaration of cash dividends in the total amount of Two Hundred Million Pesos (Php200,000,000.00) out of FCCP's unrestricted retained earnings to stockholders of record as of March 31, 2012; that the said dividends were paid to FCCC on August 11, 2012 as evidenced by a Certification of Outward Remittance issued by the RCBC on September 14, 2012. It is finally represented, based on the Certification by FCCP on August 11, 2012, that the transaction subject of the 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 judicial appeal of the taxpayer/s involved. Relative thereto, please be informed that Section 14 of Revenue Memorandum Order ("RMO") No. 72-2010 , published in the Manila Bulletin on October 20, 2010, and effective November 4, 2010, provides, as follows: " 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. CIaHDc 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 thereof, since the TTRA was filed only on September 7, 2012, after the date of the payment of dividend on August 11, 2012, this Office hereby DENIES relief on said dividends paid before the filing of the TTRA on September 7, 2012, in violation of the requirement under RMO 72-2010 that filing of the TTRA should be made BEFORE the transaction, that is the payment of dividend. Accordingly, said dividends shall be subject to tax at the rate provided for in Section 28 of the National Internal Revenue Code ("Tax Code") of 1997, as amended. "Section 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 . . . dividends , rents, royalties . . .: Provided, That effective January 1, 2009, the rate of income tax shall be thirty percent (30%)." Please be guided accordingly. CaHcET Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue