BIR Ruling No. 764-2019

BUREAUOFITERNALREVENUE REPUBLIC OF THE PHILIPPINES DEPARTMEENT OF FINANCE

Quezon City

Sec.28B5b

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

BIR Ruling No.374-13 BIR Ruling No.304-11 BIR Ruling No.378-13

0764-2019

DEC0 9 2019

R.G.MANABAT&CO.

6787 Ayala Avenue The KMPG Center,9/F Makati City 1226

Attention:Atty. Maria Georgina J. Soberano

Principal, Tax

Gentlemen:

This refers to your letter dated 20 April 2015,requesting on behalf of LAPRAIRIE GROUP CONTRACTORS INTERNATIONAL LTD.(LGCI,for confirmation that cash dividends received by LGCI from CE CASECNAN WATER AND ENERGY COMPANY,INC.(CECWEC) are subject to the fifteen percent l5%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

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 the Securities and Exchange Commission (SEC) as a foreign corporation engaged in trade It is represented that LGCI is a non-resident foreign corporation organized and

or business in the Philippines as evidenced by a Certificate of Non-Registration issued by the latter on February 5.2015;that LGCI holds a total of 115,074 common shares,with par

business address at 24th Floor,6750 Building,Ayala Avenue,Makati City,Philippines;that value of Php each or a total Php in CECWEC, a domestic corporation with

LGCI has an equivalent to shareholding in CECWEC; that in a special meeting of the Board of Directors of CECWEC held on 9 April 2015,the Board resolved that of the cash dividends in the amount of USI to be distributed, the

before 30 April 2015; and that the Department of Inland Revenue of the Government of equivalent of 15% thereof or USD will be distributed and paid to LGCI on or

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LaPrairie Group Contractors International Ltd. 20 April 2015 Page 2 of 4

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

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 domestic 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 on dividends as provided in this subparagraph; Provided, tax of thirty-five percent (35%) and the fifteen percent (15%)

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

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

0784-2019 DEC 0 9 2019

LaPrairie Group Contractors International Led.

20 April 2015 Page 3 of 4

"...since the Swiss Government does not impose any tax on the dividends to be received by the-said corporation in the Philippines, the condition imposed under the

affirmed." withholding tax rate of fifteen percent (15%) is hereby abovementioned section is satisfied. Accordingly, the

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

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

(l)(i)x

income years, amounts received by a resident company preference dividends from a non-resident company when : ompany and such shareholding is not held solely for the p urpose of porifolio investments. " registered in Barbados as dividends, other than the Barbados resident is a shareholder representing at Teast ten percent (10%) of the capital of the non-resident (ii in respect of income year 2007 and subsequent (ii) x xx

Barbados, sha Act of Barbac the non-resid Henc. is dering that LGCI holds more than ten percent (10%) of the capital of mpany, the dividends received by it, as a company registered in e included in calculating the assessable income under the Income Tax

0752-209

DEC 0 9 209

LaPrairie Group Contractors International Ltd 20 April 2015 Page 4 of 4

Based on the foregoing and in view of the fact that LGCI has been certified by the

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 911)ii,this Office hereby confirms your opinion that

cash dividends in the amount of USD declared by CECWEC on 9 April 2015 to

be received by LGCI on or before 30 April 2015 are subject to fifteen percent(15% final

withholding tax imposed under Section 28 (B)(5)(b) of the Tax Code of 1997, as amended

(BIR Ruling No.378-13 dated October 11,2013;BIR Ruling No.374-13 dated 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)

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.

ruling shall be considered null and void.

Very truly yours.

1ag0w

Commissioner of Internal Revenue CAESAR R. DULAY 031116

K-1-JAC