ITAD Ruling No. 059-02

April 24, 2002 ITAD RULING NO. 059-02 Article 10 (2) (a), RP-Japan BIR Ruling No. ITAD-90-00 TS Tech Trim Phils., Inc. 102 Technology Ave., Laguna Technopark SEPZ, Bian, Laguna Attention: Mr. Jason Mar G. Esteban Accounting Section Leader Gentlemen : This refers to your letter dated July 20, 2001, requesting to avail of the preferential tax rate of ten (10%) percent final withholding tax on your dividend payments to TS Tech Co., Ltd. (TS Tech Japan) pursuant to Article 10(2)(a) of the RP-Japan Tax Treaty. It is represented that TS Tech Japan is a non-resident foreign corporation organized and existing under the laws of Japan with principal office located at 3-7-27 Sakaecho, Asaka-shi, Saitama-ken, Japan; that it is not registered either as a corporation or as a partnership licensed to do business in the Philippines per certification issued by the Securities and Exchange Commission dated August 23, 2000; that TS Tech Phils. is a domestic corporation duly organized and existing under Philippine laws with principal office at 102 Technology Ave., Laguna Technopark, SEPZ, Bian, Laguna; that as per Secretary's Certificate dated July 30, 2001, TS Tech Japan owns the entire 124,995 shares of stock of TS Tech Phils. with a par value of Php1,000.00 per share; that the Board of Directors of TS Tech Phils. approved the declaration of cash dividends in favor of TS Tech Japan in the amount of Fifteen Million Pesos (Php15,000,000.00) payable on or before July 31, 2001 to all stockholders of record as of August 15, 2001 in proportion to their respective stockholdings as evidenced by the Board Resolution dated July 3, 2000. 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) 25 per cent of the gross amount of the dividends in all other cases." In view of the foregoing, and since TS Tech Japan owns 100% of the outstanding shares of stock of TS Tech Phils. and is the beneficial owner of the dividends, the cash dividends payable by TS Tech Phils. to TS Tech Japan are subject to 10% withholding tax. (BIR Ruling No. ITAD-90-00 dated August 1, 2000) CTDHSE This ruling is 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. Very truly yours, Commissioner of Internal Revenue By: (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service