ITAD Ruling No. 047-99

December 9, 1999 ITAD RULING NO. 047-99 RP-Japan Article 10 165-94 Rohm Electronics Philippines, Inc. People's Technology Complex Carmona 4116, Cavite, Philippines Attention: Mr . Minoru Tabata General Manager/Director Gentlemen : This is in connection with your letter dated September 21, 1999 requesting for the confirmation of your opinion that the dividend remittances of ROHM ELECTRONICS PHILIPPINES, INC. (REPI) to ROHM FUKUOKA COMPANY, LTD (ROHM FUKUOKA) is subject to the final withholding tax rate of ten per cent (10%) pursuant to the RP-Japan Tax Treaty. It is represented that ROHM FUKUOKA is a non-resident foreign corporation duly organized and existing under the laws of Japan, with principal office at 837-1, Hatakeda, Inado, Yukuhashi 824-8555 Japan; that ROHM FUKUOKA has no permanent establishment in the Philippines as evidenced by its Certificate of Non-Registration from the Securities and Exchange Commission dated August 17, 1999; that REPI is a domestic corporation duly registered with the Securities and Exchange Commission under Certificate of Registration No. 168050 with office address at People's Technology Complex Carmona, Cavite; that REPI is registered with the Board of Investment and was issued BOI Certificates of Registration EP 89-1000, EP 93-075, EP 93-382, EP 99-014 and EP 99-015; that ROHM FUKUOKA owns 80% of REPI; that on March 31, 1999 the Board of Directors of REPI passed and approved the declaration of cash dividends in the total amount of Php 496,174,000.00 or Php 50.63 per share, in favor of the stockholders of record as of March 31, 1999. In reply, please be informed that Article 10 of the RP-Japan Tax Treaty provides viz: "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; (b) . . . (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 Investments 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 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" Accordingly, this Office hereby confirms your opinion that the dividend remittances by REPI to ROHM FUKUOKA shall be subject to the preferential tax treaty rate of 10 per cent (10%). (BIR Ruling 165-94 dated December 5, 1994) 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