ITAD Ruling No. 049-00

February 22, 2000 ITAD RULING NO. 049-00 RP-Japan Article 10 ITAD 53-99 Joaquin Cunanan & Company 14th Floor Multinational Bancorporation Centre 6805 Ayala Avenue 1226 Makati City Attention: Ms . Mary A . S . Bautista-Villareal Principal Tax Services Department S i r : This refers to your letter dated December 1, 1999 on behalf of Shindengen Electric Manufacturing Company Ltd. (SEMCL), requesting for a confirmation of your opinion that the dividends to be paid and remitted by Shindengen Philippine Corporation (SPC) to SEMCL is subject to the preferential tax rate of ten per cent (10%) pursuant to the RP-Japan Tax Treaty. prcd It is represented that SEMCL is a non-resident foreign corporation, duly organized and existing under the laws of Japan with principal office address at New Ohtemachi Bldg., 2-1, Ohtemachi 2 -chome, Chiyoda-ku, Tokyo 100-0004, Japan; that it is not registered as a corporation/partnership in the Philippines as per certification dated December 2, 1999 issued by the Securities and Exchange Commission; that SPC is a corporation duly organized and existing under the laws of the Philippines; that SEMCL holds one hundred percent (100%) of the capital stock of SPC; that on October 9, 1999, the Board of Directors of SPC passed and approved the declaration of cash dividends of two hundred (P200.00) pesos per share of stock to be paid on December 31, 1999 to stockholders on record at the close of business on December 31, 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; b) 25 per cent of the gross amount of the dividends in all other cases. xxx xxx xxx" In view of the foregoing, and since SEMCL holds one hundred per cent (100%) of the capital stock of SPC, your application for a preferential tax treaty rate of 10% to be withheld by SPC on its dividend remittances to SEMCL is hereby approved. (BIR Ruling No. ITAD 53-99) 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, (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner Legal and Enforcement Group