ITAD Ruling No. 008-99

July 20, 1999 ITAD RULING NO. 008-99 RP-Japan Art. 10 Juntec Corporation Block 5, Lot 7, LIIP-PEZA Bo. Mamplasan, Bian, Laguna, Philippines Attention: Nilo A . Alinsangan Managing Director Gentlemen : This refers to your application for relief from double taxation dated 22 March 1999 on behalf of HONKO SEIKOSHO CO., LTD., requesting for a preferential tax rate of ten per cent (10%) to be withheld on dividend remittances by JUNTEC CORPORATION pursuant to the RP-Japan Tax Treaty. It is represented that HONKO SEIKOSHO CO., LTD. is a non-resident foreign corporation duly organized and existing under the laws of Japan, with no permanent establishment here, while JUNTEC CORPORATION is a domestic corporation organized and existing under the laws of the Philippines; that HONKO SEIKOSHO CO., LTD. holds ninety nine and 99/100 per cent (99.99%) of the capital stock of JUNTEC CORPORATION; that on 19 December 1998, the Board of Directors of the latter passed and approved the declaration of cash dividend in the amount of P3,000,000.00 from its unrestricted retained earnings, payable to the stockholders of record as of 31 July 1998. Based on the foregoing, you now request that the preferential rate of ten per cent (10%) under the RP-Japan Tax Treaty be applied on the dividend remittances of JUNTEC CORPORATION. In reply, please be informed that Article 10 of the RP-Japan Tax Treaty provides as follows: "Article 10 "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 Contracting State. "2. However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident, and according to the laws of that Contracting State, but if the recipient is the beneficial owner of the dividends the tax so charged shall not exceed: a. 10 per cent of the gross amount of the dividends if the beneficial owner is a company which holds directly at least 25% either of the voting shares of the company paying the dividends or of the total shares issued by that company during the period of six months immediately preceding the date of payment of the dividends; xxx xxx xxx 4. The term dividends as used in this Article means income from shares or other rights, not being debt-claims, participating in profits, as well as income from other corporate rights assimilated to income from shares by the taxation laws of the Contracting State of which the company making the distribution is a resident. In view of the foregoing, your application is hereby approved. Hence, the preferential rate to be withheld by JUNTEC CORPORATION on its dividend remittances to HONKO SEIKOSHO is ten per cent (10%) considering that the latter holds ninety nine and 99/100 per cent (99.99%) of the voting shares of the former. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be null and void. llcd (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue