ITAD Ruling No. 044-99

November 25, 1999 ITAD RULING NO. 044-99 RP-Japan Article 10 165-94 Software Ventures International Corporation 6F The JMT Corporate Condominium ADB Avenue, Pasig City Attention: Marizon B . Esquela Manager Gentlemen : This refers to your application for relief from double taxation dated October 19, 1999 on behalf of your investor, JAPAN ASIA INVESTMENT COMPANY LIMITED (JAIC) , that the dividends paid by SOFTWARE VENTURES INTERNATIONAL CORPORATION (SVIC) shall be subject to 25% withholding tax pursuant to Article 10 of the RP-Japan Tax Treaty. llcd It is represented that JAIC is a corporation organized and existing under the laws of Japan with office address at 7th Floor, Kojimachi Tsuruyahachiman Building, 4 Kojimachi 2-Chome, Chiyoda-ku Tokyo, Japan 102-0083; that JAIC has no branch or permanent establishment in the Philippines as evidenced by the Certificate of Non-Registration of Corporation issued by the Securities and Exchange Commission on August 26, 1999; that JAIC owns the following shares of stock of SVIC : P1.00/Share Stockholder No. of Shares % of Ownership JAIC-P1B INVESTMENT FUND 1,284,200 4.64% JAIC-P2A INVESTMENT FUND 733,700 2.65% JAIC-P2B INVESTMENT FUND 733,700 2.65%; that SVIC is a domestic corporation with office address at 6/F The JMT Corporate Condominium, ADB Avenue, Pasig City and registered with the Board of Investments with registration No. EP-95-105; that the SVIC 's Board of Directors in a regular meeting held on June 10, 1996, September 6, 1996, March 14, 1997, June 17, 1997 and March 20, 1998 resolved that a cash dividend amounting to Fifteen Million Three Hundred Forty Thousand Seven Hundred Pesos (P15,340,700.00), Twelve Million Pesos (P12,000,000.00) and Sixty Four Million Pesos (P64,000,000.00) be declared to all stockholders. 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. cdlex "(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 the 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) 25 per cent of the gross amount of the dividends in all other cases. The provisions of this paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid. "(3) Notwithstanding the provisions of paragraph (2), the amount of tax imposed by the Philippines on the dividends paid by a company, being a resident of the Philippines, registered with the Board of Investment and engaged in preferred pioneer areas of investment under the investment incentives laws of the Philippines to a resident of Japan, who is the beneficial owner of the dividends, shall not exceed 10 per cent of the gross amount of the dividends." LexLib "(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, your application that the preferential rate to be withheld by SVIC on its dividend remittances to JAIC is 25% is hereby approved considering that SVIC though BOI registered is not engaged in preferred pioneer areas of investment. 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