ITAD Ruling No. 192-03

December 16, 2003 ITAD RULING NO. 192-03 Article 10, RP-Switzerland BIR Ruling No. DA-147-03 Del Rosario Mendoza Tiamson Gabriel & Pulido Attorneys at Law Unit 1601 16/F 139 Corporate Center Valero St., Salcedo Village Makati City 1200 Attention: Atty. Reina Ricci Suarez-Avelino Gentlemen : This refers to your application for relief from double taxation dated November 18, 2003 on behalf of your client, Merisant Company 1 Sarl (Merisant-Company) requesting confirmation that the dividend payments of Merisant Sweetener (Philippines) Inc. (Merisant-Sweetener) to Merisant-Company is subject to ten percent (10%) preferential tax rate pursuant to Article 10(2)(a) of the RP-Switzerland tax treaty. It is represented that Merisant-Company is a nonresident corporation duly organized and existing under the laws of Switzerland with office address at Avenue H.-J Rousseau 2000 Neucahtel, Switzerland; that it is not registered either as a corporation or as a partnership per certification dated November 12, 2003 issued by the Securities and Exchange Commission; that Merisant-Sweetener is a domestic corporation duly organized and existing under Philippine laws; that as of October 31, 2003, Merisant-Company is a registered shareholder of Merisant-Sweetener and holds Four Hundred Fifty-Five Thousand Four Hundred Ninety-Six (455,496) class A shares, representing 50% of the outstanding capital stock of Merisant-Sweetener; that on October 17, 2003, the Board of Directors of Merisant-Sweetener passed and approved the declaration of cash dividends at the rate of P18.00 per share or a total of Sixteen Million Three Hundred Ninety-Eight Thousand Pesos (P16,398,000.00) to be distributed among stockholders of record as of October 31, 2003. In reply, please be informed that Article 10 of the RP-Switzerland 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 (excluding partnership) which holds directly at least 10 per cent of the capital of the paying company; "b) 15 per cent of the gross amount of the dividends in all other cases. "xxx xxx xxx "3. 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 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. aSIAHC "xxx xxx xxx Based on the aforementioned provisions, dividends paid by a Philippine corporation to a resident of Switzerland may be taxed at a rate not exceeding 10 percent of the gross amount of dividends if the recipient is a company which holds directly at least 10 per cent of the capital of the Philippine corporation. (BIR Ruling No. DA-ITAD-147-03 dated October 2, 2003) In view thereof, since Merisant-Company directly owns more than 10% of the capital stock of Merisant-Sweetener, this Office is of the opinion and so holds that the dividend payments by Merisant-Sweetener to Merisant-Company are subject to 10% preferential tax rate pursuant to Article 10(2)(a) of the RP-Switzerland tax treaty. 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. ASTIED Very truly yours, Commissioner of Internal Revenue By: (SGD.) MILAGROS V. REGALADO Assistant Commissioner Legal Service