ITAD Ruling No. 114-00

August 29, 2000 ITAD RULING NO. 114-00 RP-Korea Article 10 ITAD Ruling 49-99 Hitec-Park, Inc. Bldg. 2D, Gabriel Industrial Complex Phase IV, Block 23, Cavite Export Processing Zone Rosario, Cavite Attention: Lyndon A . Ferolino Administrative Manager Gentlemen : This refers to your letter dated May 23, 2000 requesting for a ruling on the applicable tax rate for dividends received by TAE-KWANG HITEC CO., LTD (TK HITEC) from HITEC PARK, INC., pursuant to the RP-Korea Tax Treaty. DHITcS It is represented that your company, HITEC-PARK, INC. (hereinafter referred to as the "Corporation"), is a PEZA registered enterprise operating in Rosario, Cavite City; that TK HITEC is a non-resident foreign corporation duly organized and existing under the laws of Korea with principal office at 550-9Kasan dong, Kun Chon Ku, Seoul, Korea; that TK HITEC is not registered as a corporation/partnership in the Philippines as per certification dated May 15, 2000 issued by the Securities and Exchange Commission; that the stockholders of record of the Corporation as of October 1999 are as follows: NUMBER OF NAME ADDRESS SHARES HELD TAE KWANG HITEC. CO., LTD Seoul, Korea 130,690 PARK MODELCRAFT, INC. Incheon City, Korea 1 Mr. Chun Sue Park San Diego, California, 1 United States of America Mr. Jong Kon Heong Seoul, Korea 1 Mr. Lawrence J. Gotuaco Makati City, Philippines 1 Mr. Andrew P. Gotuaco Muntinlupa, Metro 1 Manila, Philippines Total Shares 130,695 that on the 25th day of November 1999, the Corporation at a duly called meeting of its Board of Directors, declared cash dividends in the amount of ONE HUNDRED TWENTY FIVE PESOS (P125.00) per share to the shareholders of record as of October 31, 1999; and that the dividends shall be and payable in three installments: the first installment to fall due on December 23, 1999, the-second on March 31, 2000, and the third on June 30, 2000 as evidenced by the Secretary's Certificate dated December 7, 1999. In reply, please-be informed that Article 10 of the RP-Korea Tax Treaty provides as follows: "Article 10 Dividends 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 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 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 (other than a partnership) which holds directly at least 25 per cent of the capital of the company paying the dividends; and (b) 25 per cent of the gross amount of the dividends in all other cases. 3) . . . 4) The term "dividends" as used in this Article means income from shares, "jouissance" shares or "jouissance" rights, mining shares, founders' shares or other rights, not being debt-claims, participating in profits, as well as income from other corporate rights which is subjected to the same taxation treatment as income from shares by the laws of the State of which the company making the distribution is a resident". TcEDHa xxx xxx xxx" In view of the foregoing, and since TK HITEC holds directly more than 25 % of the total shares of the Corporation, the cash dividends payable by the Corporation to TK HITEC are subject to the preferential tax rate of 10% of the gross amount of dividends. 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. Very truly yours, Commissioner of Internal Revenue By: (SGD.) LILIAN B. HEFTI Deputy Commissioner Legal & Inspection Group