BIR Ruling No. 765-2019

REPUBLICOF THE PHILIPPINES

BUREAU OF INTERNALREVENUE DEPARTMENT OF FINANCE

Quezon City

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

0765-2019 DEC 0 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:

GROUP CONTRACTORS INTERNATIONAL LTD.LGCD, for confirmation that cash dividends received by LGCI from CE CASECNAN WATER AND ENERGY This refers to your letter dated 23 June 2015,requesting on behalf of LAPRAIRIE

COMPANY,INC.(CECWEC)are subject to the fifteen percent15% 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 2n Floor, Building 2Chelston Park,Collymore Rock,St. Michael,Barbados; that LGCI is not registered with It is represented that LGCI is a non-resident foreign corporation organized and

the Securities and Exchange Commission (SEC) as a foreign corporation engaged in trade or business in the Philippines as evidenced by a Certificate of Non-Registration issued by the latter on 5 February 2015; that LGCI holds a total o business address at 24th Floor,6750 Building,Ayala Avenue,Makati CityPhilippines;that value of Phpeach or a total Php in CECWEC,a domestic corporation with common shares, with par

LGCI has an equivalent to fifteen percent(15%shareholding in CECWEC;that in a special

meeting of the Board of Directors of CECWEC held on 5 June 2015,the Board resolved that of the cash dividends in the amount of USD June 2015; and that the Department of Inland Revenue of the Government of Barbados has ofthereof or USL will be distributed and paid to LGCI on or before 30 to be distributed, the equivalent

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LaPrairie Group Contractors International Ltd.

23June 2015 Page 2 of 4

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 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 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

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---

0765-2019

DEC 0 9 2019

LaPrairie Group Contractors International Ltd. 23 June 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

abovementioned section is satisfied. Accordingly, the

withholding tax rate of fifteen percent (15%) is hereby affirmed. "

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)xxx

(iii) 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.

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LaPrairie Group Contractors International Ltd. Page 4 of 4 23 June 2015

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 Can 73 Section 9 (1)(1)(ii), this Office hereby confirms your opinion that to be received by LGCI on or before 30 June 2015 are subject to fifteen percent (15%) final cash diuends in the amount of USD 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) Based on the foregoing and in view of the fact that LGCI has been certified by the declared by CECWEC on 5 June 2015

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.

awa Very truly yours,

Commissioner of Internal Revenue CAESAR R.DULAY

031134

K-1-JAC