BIR Ruling No. 412-2020

REPUBLIC F THE PHILIPPINES

DEPARTMENT OF FINANCE

BUREAU OF INTERNAL REVENUE

Quezon City

Sec.28B5bof the Tax Code of 1997, as amended. BIR Ruling No. 442-13;

BIR Ruling No. 057-12 BIR Ruling No. 629-12;

0T-0412-20 IUL 2 4 2020

CE CASECNAN II, INC. 24th Floor, 6750 Ayala Avenue, Makati City 1226

Attention:TRINITY S.GATUZ

Director

Gentlemen:

This refers to your letter dated 14 April 2014, requesting for confirmation of your

CASECNAN LTD. (CEL) shall be subject to the 15% preferential final withholding tax opinion that dividend remittances of CE CASECNAN II, INC. (CE II) to CE

rate under Section 28 (B)(5)(b) of the Tax Code of 1997, as amended, otherwise known as "tax sparing credit".

the Registrar of Companies in its August 15, 1994 Certificate of Incorporation pursuant to with business address at 24th floor, 6750 Ayala Avenue, Makati City; that CE II was incorporated on January 7, 2003 primarily to acquire, hold, own and use for investment, or situated, as to the extent permitted by law; that CEL, on the other hand, is a company Church Street, Hamilton, HM1 1 Bermuda; that CEL is an exempt company as certified by and outstanding shares of stock of CE II; that CEL is a non-resident company as evidenced (SEC) dated January 16, 2014; that pursuant to its internal corporate policies, CE II regularly declares dividends to its stockholders; that the remittance of dividends by CE II and its receipt by CEL is therefore a recurring transaction between the companies; and that per CE II's Secretary's Certificate dated 8 April 2014, cash dividends in the amount of than fifteen (15) days from actual receipt by CE II of its shares in the dividends declared otherwise, sell or dispose of properties of every kind and description and whenever organized and existing under the laws of Bermuda with address at Clarendon House, 2 by a Certificate of Non-Registration issued by the Securities and Exchange Commission of the Corporation, to be paid out to the stockholders of record as of 8 April 2014, no later Section 14 of the Bermuda Companies Act of 1981; that it owns US$ Documents submitted disclose that CE II, with Taxpayers Identification No. , is a corporation organized and existing under the laws of the Philippines, were declared during the 8 April 2014 meeting of the Board of Directors of the total issued

OT-0412-2020 JUL 2 4 2020

CE CASECNAN HI, INC. Page 2 cf 4

by CE Casecnan Water and Energy Company, Inc. during the board meeting held on 8

April 2014.

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

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

XXX XXX XXX

(B)Tax on Nonresident Foreign Corporation.

XXX XXX XXX

(5) Tax or Certain Incomes Received by a Nonresident Foreign Corporation.

XXX XXX XXX

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

foreign corporation from a domestic corporation, subject to the condition that the country in which the non-resident foreign corporation is domiciled shall allow a credit against the tax due from the non-resident foreign corporation taxes deemed to have been paid in the rate of fifteen percent (15%) is imposed on cash dividends received by a non-resident Philippines equivalent to fifteen percent (15%). In other words, the only condition for the application of the tax sparing credit is that the country-domicile of the recipient corporation allows a credit against the tax due from non-resident foreign corporations. Under the said provision, it is undisputed that a final withholding tax at the lower

OT-0412-2020 JUL 2 4 2020

CE CASECNAN II, INC. Page 3 of 4

credit for the taxes deemed paid in the Philippines. on dividends received by a non-resident foreign corporation from a domestic corporation applies if the domiciliary law of the non-resident foreign corporation allows [a similar] tax Commissioner of Internal Revenue vs. Procter & Gamble Philippine Manufacturing Corporation, [204 SCRA 377 (1991)], and later reiterated in Singapore Telecom International Pte. Ltd. vs. Commissioner of Internal Revenue, CTA Case No. 7406 dated April 7, 2009, held that the preferential tax treatment of 15% of the final withholding tax In stressing the rationale of the above principle, the Supreme Court, in the case of

sufficient basis for the applicability of the 15% tax rate. Thus: Philippines, Inc., [160 SCRA 573 (1988)] has ruled that exemption from taxes by the country of domicile of the non-resident corporate stockholder on the dividends received, is The Supreme Court, in the case of Commissioner of Internal Revenue vs. Wander

Code, would run counter to the very spirit and intent of said law and discourage them from investing capital in our country. " respondent the privilege to withhold only 15% tax provided for under definitely will adversely affect foreign corporation's interest here and strictly against the claimant, nevertheless, the fact that Switzerland did not impose any tax on the dividends received by Glaxo from the condition. For, as aptly stated by respondent court, to deny private Presidential Decree No. 369 amending Section 24(b)(1) of the Tax Philippines should be considered as a full satisfaction of the given "While it may be true that claims for refund are construed

corporate stockholder on the dividends received is sufficient for the applicability of the 15% tax rate. Thus, the exemption from taxes by the country of domicile of the non-resident

that any legislation is enacted in Bermuda imposing any tax computed on profits, income, in Bermuda under the Exempted Undertakings Tax Protection Act of 1966 that, in the event gain or appreciation on any capital assets, or any tax in the nature of estate duty or inheritance tax, such tax will not be applicable to CEL, or any of its operations until March person ordinarily resident in Bermuda or any company in respect of its ownership of real property or leasehold interests in Bermuda. 31, 2035. The undertaking does not, however, prevent the imposition of taxes on any In this case, CEL has received a written undertaking from the Minister of Finance

Certification that Bermuda is not an Income Tax jurisdiction and persons residing therein are not subject to income tax. (BIR Ruling No. 057-12 dated February 9, 2012) Moreover, the Minister of Finance of the Government of Bermuda issued a

April 2014, to be paid by CE II to CEL, a non-resident foreign corporation domiciled in SUCH BEING THE CASE, this Office holds that cash dividends declared on 8

OT-0412-2020 JUL 2 4 2320

Page 4 of 4 CE CASECNAN II, INC.

Bermuda, not later than fifteen (15) days from the actual receipt by CE II of its share in the dividends declared by CE Casecnan Water and Energy Company, Inc. during the board meeting held on 8 April 2014, are subject to the 15% final withholding tax as prescribed in Section 28 (B)(5)(b) of the Tax Code of 1997. (BIR Ruling Nos. 629-12 dated November 22, 2012 and 442-13 dated November 27, 2013)

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

Very truly yours,

Ma3a1

CAESAR R.DULAY Commissioner of Internal Revenue

K-1-JAC 035785