ITAD Ruling No. 106-00

August 9, 2000 ITAD RULING NO. 106-00 RP-Netherlands Article 10 ITAD 28-99 ITAD 28-00 Claflin Chemical Company, Inc. 74 Epifanio delos Santos Avenue Mandaluyong City Attention: Mr. Ramon T. Quilloy, Jr. Director Gentlemen : This refers to your application for relief from double taxation dated June 4, 1999 on behalf of SMITHKLINE BEECHAM INTERCREDIT B.V., requesting for a preferential tax rate of ten per cent (10%) to be withheld on dividend remittances by CLAFLIN CHEMICAL COMPANY, INC. pursuant to the RP-Netherlands Tax Treaty. It is represented that SMITHKLINE BEECHAM INTERCREDIT B.V. is a non-resident foreign corporation duly organized and existing under the laws of Netherlands, with no permanent establishment here in the Philippines per certification dated March 4, 1999 issued by the Securities and Exchange Commission, while CLAFLIN CHEMICAL COMPANY, INC. is a domestic corporation organized and existing under the laws of the Philippines; that SMITHKLINE BEECHAM INTERCREDIT B.V. owns 10,245 shares with par value P1,024,500.00, comprising ninety nine and 99/100 per cent (99.99%) of the total outstanding capital stock of CLAFLIN CHEMICAL COMPANY, INC. as of November 30, 1999; that on December 9, 1998, the Board of Directors of CLAFLIN CHEMICAL COMPANY, INC. passed and approved a resolution declaring a cash dividends in the amount of P1,500,000 00 or P146.34 per share, in favor of its stockholders of record as of November 30, 1998. Based on the foregoing, you now request that the preferential tax rate of ten per cent (10%) under the RP-Netherlands Tax treaty be applied on the dividend remittances of CLAFLIN CHEMICAL COMPANY, INC. to SMITHKLINE BEECHAM INTERCREDIT B.V. SaIHDA In reply, please be informed that Article 10 of RP-Netherlands Tax Treaty provides as follows: "Article 10 1. Dividends paid by a company which is a resident of one of the States to a resident of the other State may be taxed in that other State. 2. However, such dividends may also be taxed in the State of which the company paying the dividends is a resident and according to the laws of that 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 recipient is a company the capital of which is wholly or partly divided into shares and which holds directly at least 10 per cent of the capital of the company paying the dividends; b) 15 per cent of the gross amount of the dividends in all other cases. 3. . . . 4. . . . 5. The term dividends as used in this Article means income from shares, "jouissance" shares or "jouissance" rights, mining shares, founders' shares or other rights participating in profits, as well as income from debt-claims participating in profits and income from other corporate rights which is subjected to the same taxation treatment as income from shares by the taxation law of the State of which the company making the distribution is a resident. xxx xxx xxx" In view of the foregoing, your application is hereby approved. Hence, the preferential rate to be withheld by CLAFLIN CHEMICAL COMPANY, INC., on its dividend remittances to SMITHKLINE BEECHAM INTERCREDIT B.V. is ten per cent (10%) considering that the latter holds ninety nine and 99/100 (99.99%) of the voting shares of the former. (ITAD Ruling 28-99; ITAD Ruling 28-00) ACcTDS 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