ITAD Ruling No. 014-99

July 28, 1999 ITAD RULING NO. 014-99 RP-Japan Art. 10 AVC Chemical Corporation 7th Floor, Padilla Building, Emerald Avenue, Pasig, Metro Manila Attention: Mr . Ernesto E . Lichauco President Gentlemen : This refers to your letter dated June 1, 1999 requesting for the renewal of the authority previously granted by this Office on April 13, 1994 (photocopy attached) relative to the availment of the preferential tax treaty rate of ten per cent (10%) on dividend remittances by AVC CHEMICAL CORPORATION (AVC) to ISHIHARA SANGYO KAISHA LTD. (ISHIHARA), pursuant to the RP-Japan Tax Treaty. It is represented that ISHIHARA is a non-resident foreign corporation duly organized and existing under the laws of Japan; that it is not registered either as a corporation/partnership in the Philippines as per certification dated May 19, 1999 issued by the Securities and Exchange Commission; that AVC is a corporation duly organized and existing under the laws of the Philippines; that ISHIHARA holds thirty per cent (30%) of the total subscribed and paid-up capital of AVC; that on April 05, 1999, the Board of Directors of AVC approved the declaration of cash dividend of P4.00 per share, payable to all qualified stockholders of record as of April 30, 1999, payable on or before May 31, 1999. 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. LibLex 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 per cent 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; (b) . . . 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. xxx xxx xxx In view of the foregoing, and, since ISHIHARA SANGYO KAISHA LTD. holds thirty per cent (30%) of the total subscribed and paid-up capital of AVC CHEMICAL CORPORATION, your request for the renewal of your previous authority to avail of the preferential tax treaty rate of ten per cent (10%) on the dividend under consideration is hereby granted. This approval shall be valid for all dividends payable to ISHIHARA SANGYO KAISHA LTD. under similar circumstances from April 15, 1999 to April 15, 2002, unless otherwise earlier revoked by this Office. 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. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group