BIR Ruling No. 411-2020

REPUBLICOF THE PHHLIPPINES

DEPARTMENT OF FINANCE

BUREAU OF INTERNAL REVENUE

Quezon City

Sec.28B5b

BIR Ruling No. 428-14; BIR Ruling No. 378-13; BIR Ruling No. 467-14;

BIR Ruling No.374-13; BIR Ruling No.304-11

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

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

Gentlemen:

LAPRAIRIE GROUP CONTRACTORS INTERNATIONAL LTD. (LGCD), for confirmation that cash dividends received by LGCI from CE CASECNAN WATER AND ENERGY COMPANY,INC. (CECWEC) are subject to the fifteen percent (15%) preferential final withholding tax rate under Section 28 (B)(5)(b) of the Tax Code of 1997, as amended, otherwise known as "tax sparing credit". This refers to your letter dated 24 February 2015, requesting on behalf of

before 28 February 2015; and that the Department of Inland Revenue of the Government of the Securities and Exchange Commission (SEC) as a foreign corporation engaged in trade meeting of the Board of Directors of CECWEC held on 12 February 2015, the Board existing under the laws of Barbados with registered business address at 2nd Floor, Building 2, Chelston Park, Collymore Rock, St. Michael, Barbados; that LGCI is not registered with or business in the Philippines as evidenced by a Certificate of Non-Registration issued by the latter on April 30, 2014; that LGCI holds a total of value of Phpeach or a total Php 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 resolved that of the cash dividends in the amount of USD equivalent of 15% thereof or USD It is represented that LGCI is a non-resident foreign corporation organized and will be distributed and paid to LGCI on or in CECWEC, a domestic corporation with common shares, with par to be distributed, the

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LaPrairie Group Contractors International Ltd.

24 February 2015

Page 2 of 4

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.

Based on the foregoing representations, you now request confirmation that cash 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.

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 Corporation.

XXX XXX XXX

(B) Tax on Nonresident Foreign Corporation.

XXX XXX XXX

(b) Inter-corporate Dividends. -- A final withholding tax at the

rate of fifteen percent (15%) is hereby imposed on the amount

of cash and/or property dividends received from a domestid

corporation, which shall be collected and paid as provided in

Section 57(A) of this Code, subject to the conditions 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 Philippines equivalent to twenty percent. (20%), which represents the difference between the regular income tax of thirty-five percent (35%) and the fifteen percent (15%) tax on dividends as provided in this subparagraph; Provided. that effective January 1, 2009 the credit against the tax due shall be equivalent to fifteen percent (15%), which represents the difference between the regular income tax of thirty percent (30%) and the fifteen percent (15%) tax on dividends.

XXX XXX XXX

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

April 15, 1988), ruled that---

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24 February 2015 LaPrairie Group Contractors International Ltd. Page 3 of 4

withholding tax rate of fifteen percent (15%) is hereby 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 affirmed. " "...since the Swiss Government does not impose any

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

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: "In this case, the Department of Inland Revenue of the

"Calculation of Assessable Income: Amounts Not Included

income year, the following amounts shall not be included namely; 9. (1) In calculating the assessable income of a person for an

(a) xxx

)(i) x x x

company and such shareholding is not held solely for the 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 purpose of portfolio investments. " income years, amounts received by a resident company (iii) in respect of income year 2007 and subsequent (ii) x x x

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

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LaPrairie Group Contractors International Ltd. 24 February 2015 Page 4 of 4

as amended. (BIR Ruling No. 378-13 dated October 11, 2013; BIR Ruling No. 374-13 dated 2015 to be received by LGCI on or before 28 February 2015 are subject to fifteen percent (15%) final withholding tax imposed under Section 28 (B)(5)(b) of the Tax Code of 1997, October 10, 2013; BIR Ruling No. 304-11 dated August 15, 2011; BIR Ruling No. 428-2014 dated October 27, 2014; and BIR Ruling No. 467-2014 dated November 19, 2014) Income Tax Act Cap 73 Section 9 (1)(1)(iii), this Office hereby confirms your opinion that cash dividends in the amount of USD 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 Based on the foregoing and in view of the fact that LGCI has been certified by the declared by CECWEC on 12 February

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.

esaas Very truly yours,

Commissioner of Internal Revenue CAESAR R. DULAY

035766 K-1-JAC