BIR Ruling No. 409-2020

REPUBLIC OF THE PHILIPPINES

DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE

Quezon City

Sec.28B(5b

BIR Ruling No.249-13; BIR Ruling No. 218-13; BIR Ruling No. 559-12;

BIR Ruling No. 304-11 BIR Ruling No. 430-12; OT-0409 - 2020

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

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

Gentlemen:

cash dividends received by LGCI from CE CASECNAN WATER AND ENERGY GROUP CONTRACTORS INTERNATIONAL LTD. (LGCI), for confirmation that COMPANY, INC. (CECWEC) are subject to the fifteen percent (15%) preferential final This refers to your letter dated 26 July 2013, requesting on behalf of LAPRAIRIE

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 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 11 February 2013; that LGCI holds a total of common shares, with par value of Php each or a total Php in CECWEC, a domestic corporation with 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 meeting of the Board of Directors of CECWEC held on 22 July 2013, the Board resolved that of the cash dividends in the amount of USD to be distributed, the

before 31 July 2013; 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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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.

preferential final withholding tax rate prescribed in Section 28 (B)(5)(b) of the Tax Code of dividends to be received by LGCI from CECWEC are subject to the fifteen percent (15%) 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

tax on dividends as provided in this subparagraph; Provided, 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 paid in the Philippines equivalent to twenty percent (20%), tax of thirty-five percent (35%) and the fifteen percent (15%) (b) Inter-corporate Dividends. -- A final withholding tax at the 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 which represents the difference between the regular income

shall be equivalent to fifteen percent (15%), which represents that effective January 1, 2009 the credit against the tax due

(30%) and the fifteen percent (15%) tax on dividends. the difference between the regular income tax of thirty percent

XXX XXX XXX

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

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tax on the dividends to be received by the said corporation in the Philippines, the condition imposed under the withholding tax rate of fifteen percent (15%) is hereby abovementioned sectionis 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:

Act Cap 73 Section 9 (1) (1) (iii), which stresses 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 "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

registered in Barbados as dividends, other than preference dividends from a non-resident company when the Barbados resident is a shareholder representing at company and such shareholding is not held solely for the income years, amounts received by a resident company least ten percent (10%) of the capital of the non-resident (l)(i) x x x (iii) in respect of income year 2007 and subsequent (ii) x x x

purpose of portfolio investments. "

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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Barbadian Department of Inland Revenue that it will not be subiect to tax on the cash Based on the foregoing and in view of the fact that LGCI has been certified by the

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 declared by CECWEC on 22 July 2013 to

be received by LGCI on or before 31 July 2013 are subject to fifteen percent (15%) final

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

2012; BIR Ruling 559-2012 dated September 6, 2012; BIR Ruling No. 218-2013 dated June (BIR Ruling No. 304-11 dated August 15, 2011; BIR Ruling No. 430-2012 dated June 25, 14, 2013; and BIR Ruling No. 249-2013 dated July 8, 2013)

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,

o awAwa

Commissioner of Internal Revenue CAESAR R. DULAY

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