ITAD Ruling No. 138-03

September 15, 2003 ITAD RULING NO. 138-03 Art. 10, RP-Korea tax treaty BIR Ruling No. ITAD-114-00 SAMMA Corporation Main Ave., Cavite Economic Zone Rosario, Cavite Attention: Mr. Sei Yeol Kim President Gentlemen : This refers to your letter dated May 2, 2003, requesting that the preferential tax rate of 10% be applied on the dividends payments of SAMMA Corporation (SAMMA) to SAMYANG TONGSANG Co., Ltd. (SAMYANG) pursuant to the RP-Korea tax treaty. It is represented that SAMYANG is a corporation organized and existing under the laws of Korea with principal address at 701-2 Yeoksam, Kangnam-gu, Seoul, Korea; that it is not registered either as a corporation or as a partnership and has not been licensed to do business in the Philippines per certification issued by the Securities and Exchange Commission dated June 4, 2003; that SAMMA is a PEZA registered corporation organized and existing under the laws of the Philippines with principal address at Blk. 16 Lots 2, 4 & 6, Main Ave., Phase IV, PEZA, Rosario Cavite 4106; that since June 27, 2002, SAMYANG owned 4,462,635 shares of stock of SAMMA as of April 30, 2003 which represent 99.99% of the total outstanding capital stock of SAMMA and has an aggregate par value of P44,626,350; that at the meeting of the Board of Directors of SAMMA held on April 30, 2003, the Board declared dividends out of SAMMA's unrestricted retained earnings in the total amount of Eighteen Million Nine Hundred Twenty Eight Thousand One Hundred Sixty Four Pesos and Sixty Centavos (P18,928,164.60) payable to all stockholders of record of SAMMA as of April 30, 2003; and that the said dividends shall be paid in cash and shall be distributed to the stockholders of records on May 15, 2003. 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. LLpr "xxx xxx xxx" In view of the foregoing, and since SAMYANG is a beneficial owner which holds directly more than 25% of the total shares of SAMMA, the cash dividends payable by SAMMA to SAMYANG are subject to the preferential tax rate of 10% of the gross amount of dividends. (BIR Ruling No. ITAD-114-00 dated August 29, 2000) This ruling is issued on the basis of the facts as represented. However, if upon investigation it shall be disclosed that the facts are different, then this ruling shall be without force and effect insofar as the herein parties are concerned. Very truly yours, Commissioner of Internal Revenue By: (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service