ITAD Ruling No. 025-00

January 28, 2000 ITAD RULING NO. 025-00 RP-Japan - Art. 10 ITAD 8-99 NCCI Marine Inc. 1511 Marcelo St., Ermita Manila Attention: Mr . Panfilo W . Castro, Jr . President Gentlemen : This refers to your application for relief from double taxation dated August 30, 1999 on behalf of TATSUMI MARINE CO., LTD. (TATSUMI), requesting for a preferential tax rate of ten per cent (10%) to be withheld on dividend remittances by NCCI MARINE INC. (NCCI), pursuant to the RP-Japan Tax Treaty. It is represented that TATSUMI 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 August 12, 1999 issued by the Securities and Exchanged Commission; that NCCI is a corporation duly organized and existing under the laws of the Philippines; that TATSUMI holds forty per cent (40%) of the total subscribed and paid-up capital of NCCI; that on July 01, 1997, the Board of Directors of NCCI passed and approved the declaration of cash dividend equivalent to 10% of the paid-up capital of the corporation payable to all shareholders of record as of July 01, 1997. cdll 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; 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 tax rate to be withheld by NCCI MARINE INC. on its dividend remittances to TATSUMI MARINE CO., LTD., is ten per cent (10%) considering that the latter holds forty per cent (40%) of the shares of the former. (BIR Ruling 08-99 dated July 20, 1999) 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. LibLex Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group