BIR Ruling No. 324-2020

REPUBLIC OF THE PHILIPPINES

DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE

Quezon City

BIR Ruling No. 374-13; Sec.28B5b BIR Ruling No. 467-14; BIR Ruling No. 428-14; BIR Ruling No.378-13; BIR Ruling No.304-11

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Makati City 1226 6787 Ayala Avenue, R.G. MANABAT & CO The KMPG Center, 9/F

Attention:Atty. Maria Georgina J. Soberano Principal, Tax

Gentlemen:

preferential final withholding tax rate under Section 28 (B)(5)(b) of the Tax Code of 1997, LAPRAIRIE GROUP CONTRACTORS INTERNATIONAL LTD. (LGCID, for confirmation that cash dividends received by LGCI from CE CASECNAN WATER AND ENERGY COMPANY, INC.(CECWEC) are subject to the fifteen percent (15%) as amended, otherwise known as "tax sparing credit". This refers to your letter dated 24 November 2014, requesting on behalf of

existing under the laws of Barbados with registered business address at 2nd Floor, Building or business in the Philippines as evidenced by a Certificate of Non-Registration issued by business address at 24th Floor, 6750 Building, Ayala Avenue, Makati City, Philippines; that LGCI has an equivalent to fifteen percent (15%) shareholding in CECWEC; that in a special 2, Chelston Park, Collymore Rock, St. Michael, Barbados; that LGCI is not registered with the Securities and Exchange Commission (SEC) as a foreign corporation engaged in trade meeting of the Board of Directors of CECWEC held on 17 November 2014, the Board the latter on 30 April 2014; that LGCI holds a total of value of Phpeach or a total Php It is represented that LGCI is a non-resident foreign corporation organized and in CECWEC,a domestic corporation with common shares,with par

or before 30 November 2014; and that the Department of Inland Revenue of the Government resolved that of the cash dividends in the amount of USD the equivalent of I5% thereof or USD will be distributed and paid to LGCI on I to be distributed.

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of Barbados has issued a certification confirming that the dividends received by LGCI from the non-resident Philippine Company will not be included in the assessable income of the Company.

dividends to be received by LGCI from CECWEC are subject to the fifteen percent (15%) preferential final withholding tax rate prescribed in Section 28 (B)(5)(b) of the Tax Code of 1997, as amended. Based on the foregoing representations, you now request confirmation that cash

1997, as amended provides that - In reply thereto, please be informed that Section 28 (B)(5)(b) of the Tax Code of

"SEC. 28. Rates of Income Tax on Foreign Corporation.

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(B) Tax on Nonresident Foreign Corporation.

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paid in the Philippines equivalent to twenty percent (20%), the difference between the regular income tax of thirty percent domiciled, shall allow a credit against the tax due from the which represents the difference between the regular income tax on dividends as provided in this subparagraph; Provided, that effective January 1, 2009 the credit against the tax due rate of fifteen percent (15%) is hereby imposed on the amount corporation, which shall be collected and paid as provided in country in which the non-resident foreign corporation is non-resident foreign corporation taxes deemed to have been tax of thirty-five percent (35%) and the fifteen percent (15%) shall be equivalent to fifteen percent (15%), which represents (30%) and the fifteen percent (15%) tax on dividends. " (b) Inter-corporate Dividends. -- A final withholding tax at the of cash and/or property dividends received from a domestic Section 57(A) of this Code, subject to the conditions that the

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Commissioner of Internal Revenue v.Wander Philippines, Inc.(G.R. No.L-68375 dated April 15, 1988), ruled that--- In stressing the rationale of the above provisions, the Supreme Court in the case of

N

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tax on the dividends to be received by the said corporation in the Philippines, the condition imposed under the abovementioned section is satisfied. Accordingly, the withholding tax rate of fifteen percent (15%) is hereby affirmed." "..since the Swiss Government does not impose any

Thus in BIR Ruling No. 304-11 dated August 15, 2011, this Office ruled that:

"In this case, the Department of Inland Revenue of the Government of Barbados has issued a Certification that LGCI will not be subject to tax on dividends from its non-resident affiliate in accordance with the provisions of the Income Tax Act Cap 73 Section 9 (1) (1) (iii), which stresses that:

"Calculation of Assessable Income:

Amounts Not Included

9. (1) In calculating the assessable income of a person for an

income year, the following amounts shall not be included

namely;

(a) xxx

(l)(i) x x x

(ii) in respect of income year 2007 and subsequent (ii) x x x

income years, amounts received by a resident company registered in Barbados as dividends, other than preference dividends from a non-resident company when the Barbados resident is a shareholder representing at

least ten percent (10%) of the capital of the non-resident company and such shareholding is not held solely for the

purpose of portfolio investments.

Hence, considering that LGCI holds more than ten percent (10%) of the capital of

the non-resident company, the dividends received by it, as a company registered in

Barbados, shall not be included in calculating the assessable income under the Income Tax

Act of Barbados. S

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Barbadian Department of Inland Revenue that it will not be subject to tax on the cash dividends received from its non-resident affiliate in accordance with the provisions of the Income Tax Act Cap 73 Section 9 (1)(1)(iii), this Office hereby confirms your opinion that cash dividends in the amount of USD : (15%) final withholding tax imposed under Section 28 (B)(5)(b) of the Tax Code of 1997, 2014 to be received by LGCI on or before 30 November 2014 are subject to fifteen percent October 10, 2013; BIR Ruling No. 304-11 dated August 15, 2011; BIR Ruling No. 428-2014 as amended. (BIR Ruling No. 378-13 dated October 11, 2013; BIR Ruling No. 374-13 dated Based on the foregoing and in view of the fact that LGCI has been certified by the declared by CECWEC on 17 November

dated October 27, 2014; and BIR Ruling No. 467-2014 dated November 19, 2014)

However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. This ruling is being issued on the basis of the foregoing facts as represented.

Very truly yours. eeeeec

Commissioner of Internal Revenue CAESAR R. DULAY

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