ITAD Ruling No. 020-99

August 18, 1999 ITAD RULING NO. 020-99 RP-Japan Art. 12 000 KDK International (Phils.) Corporation 11-A Harmony St. cor. Eleven Road, Grace Village, Balintawak, Quezon City Attention: Ng Siong Chi Vice-President Gentlemen : This refers to your application for relief from double taxation dated 09 November 1998 on behalf of MATSUSHITA SEIKO CO. LTD. (MATSUSHITA), requesting for a preferential tax rate of ten percent (10%) to be withheld on dividend remittances by KDK INTERNATIONAL (PHILS.) CORPORATION (KDK), pursuant to the RP-Japan Tax Treaty. LexLib It is represented that MATSUSHITA 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 04 March 1999 issued by the Securities and Exchange Commission; that KDK is a corporation duly organized and existing under the laws of the Philippines; that MATSUSHITA holds forty percent (40%) of the capital stock of KDK; that on 05 October 1998, the Board of Directors of the latter passed and approved the declaration of cash dividend in the amount of P600,000.00, payable to the stockholders of record as of 31 October 1998. 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 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; LibLex 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. xxx xxx xxx" In view of the foregoing, and since MATSUSHITA SEIKO CO., LTD. holds forty per cent (40%) of the capital stock of KDK INTERNATIONAL (PHILS.) CORPORATION, your application is hereby approved. Hence, the preferential tax rate to be withheld by the latter on its dividend remittances to the former is ten per cent (10%). 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. cdlex Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue