ITAD Ruling No. 037-99

November 3, 1999 ITAD RULING NO. 037-99 RP-Singapore-Art. 10 (2) (a) 010-84 Cape East Philippines, Inc. Tolentino Road Sitio Centro, Kumintang Ibaba Batangas City Attention: Mr . Edwin V . Alea Accountant Gentlemen : This refers to your application for relief from double taxation dated March 16, 1999 on behalf of Cape East Pte. Ltd. (CapeSingapore) requesting for a preferential tax rate of fifteen percent (15%) to be withheld on dividend remittances by Cape East Philippines, Inc. (CapePhilippines) pursuant to the RP-Singapore Tax Treaty. It is represented that CapeSingapore is a non-resident foreign corporation duly organized and existing under the laws of Singapore; that it is not registered either as a corporation/partnership in the Philippines as per certification dated March 10, 1999 issued by the Securities and Exchange Commission (SEC); that it owns 99.9905% of the issued and outstanding capital stock of CapePhilippines, a domestic corporation duly organized and existing under the laws of the Philippines; and that on June 15, 1998, the Board of Directors of CapePhilippines passed and approved a resolution declaring from its surplus profits a dividend of two hundred eighty four pesos (P284.00) per share on the common stock payable on October 30, 1998, to holders of record of the said stock at the close of business on June 30, 1998. In reply, please be informed that Article 10 (2)(a) of the RP-Singapore Tax Treaty provides, as follows: "Article 10 Dividends "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 State. 2. However, such dividends may be taxed in the Contracting State of which the company paying the dividends is a resident, and according to the law of that State, but if the recipient is the beneficial owner of the dividends the tax so charged shall not exceed: a) 15 per cent of the gross amount of the dividends if the recipient is a company (including partnership) and during the part of the paying companys taxable year which precedes the date of payment of the dividend and during the whole of its prior taxable year (if any), at least 15 per cent of the outstanding shares of the voting stock of the paying company was owned by the recipient company; and llcd b) in all other cases, 25 per cent of the gross amount of the dividends. xxx xxx xxx" Considering that CapeSingapore owns 99.9905% of the outstanding shares of the voting stock of CapePhilippines, the dividends issued by the latter are subject to 15% withholding tax under the afore-mentioned provision of the RP-Singapore Tax Treaty. (BIR Ruling No. 010-84) 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 considered null and void. cdll Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group