ITAD Ruling No. 091-00

August 1, 2000 ITAD RULING NO. 091-00 RP-Japan Article 12 ITAD #20-99 KDK International (Phils.) Corporation 11-A Harmony Street cor. Eleven Road, Grace Village Balintawak Quezon City Attention: Ng Siong Chi Vice-President Gentlemen : This refers to your application for relief from double taxation dated September 14, 1997 on behalf of MATSUSHITA SEIKO CO LTD. (MATSUSHITA) requesting for a preferential tax rate of ten percent (10%) to be withheld on dividend remittances by KDK INTERNATIONAL (PHILS.) CORPORATION (KDK) pursuant to the RP-Japan Tax Treaty. It is represented that MATSUSHITA is a non-resident foreign corporation duly organized and existing under the laws of Japan; that it is not registered either as a corporation/partnership in the Philippines as per certification dated March 4, 1999 issued by the Securities and Exchange Commission; that KDK is a corporation duly organized and existing under the laws of the Philippines; that MATSUSHITA holds forty percent (40%) of the capital stock of KDK; that on July 31, 1997 the Board of Directors of KDK passed and approved the declaration of cash dividend in the amount of Four Hundred Thousand Pesos (P400,000.00) payable to the stockholders on or before August 31, 1997. LibLex 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 percent 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; xxx xxx xxx "(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, and since MATSUSHITA SEIKO., LTD. holds forty per cent (40%) of the capital stock of KDK INTERNATIONAL (PHILS.) CORPORATION, your application is hereby approved. Hence, the preferential tax rate to be withheld by KDK on its dividend remittances to Matsushita is ten per cent (10%). (BIR Ruling No. ITAD 20-99) 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.) LILIAN B. HEFTI Deputy Commissioner Legal and Inspection Group