BIR Ruling No. 001-2025

BUREAU OF INTERNAL REVENUE REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE

Bringing In Revenues for Nation-Building PILIPINAS BAGONG

Sec. 32(B)(7)(a)(i), Tax Code BIR Ruling No. 495-12 QT 001-2.025 4N_0-32035

20th Floor, Chatham House, Rufino Cor. Valero Sts. Salcedo Village, 1227, Makati City DU-BALADAD AND ASSOCIATES

Attention: Mr. Fulvio D. Dawilan Managing Partner Gentlemen:

withholding taxes in accordance with Section 32(B)(7)(a)(i) of the National Internal PLACEMENT DU QUEBEC ("CDPQ") for confirmation of your opinion that all income received by CDPQ from current and future investments in the Philippincs (including but not iimited to, interest and dividends) is exempt from income tax and Revenuc Code of 1997, as amended ("Tax Code") This refers to your request on behalf of your client, CAISSE DE DEPOT ET

Background

As represented, in Quebec's public administrative administrative functions are assigned to"autoriomous agencies rather than to government ministries. These agencies are corporations, councils, bureaus, boards, commissions or administrative tribunals. Each of these agencies reports to the"minister, who is accountable for their management before the National Assembly. system,certain

2. It is also represented that CDPQ is among the autonomous corporations assigned with administrative functions under Quebec's public administrative system. 3.CDPQ was created by an Act of the National Assembly of Quebec, otherwise of depositors' investment policies while at the samc time contributing to Quebcc's economic development. Specifically, it manages public pension known as "An Act Respecting the Caisse de depot et placement du Quebec ("the Act") for the purpose of receiving moneys on deposit and managing the samc with a view to achieving optimal rcturn on capital within the framework piuns and insurancc program in Quebec, Canada.

BIR National Office Bldg., Senator Miriam Defensor-Santiago Avenue, Ditiman, Quezon City ' http://www.gouv.qc.ca/EN/l.cQuebec/pages/AdministrationPubliquc.aspx Trunkline: 8981-7000 : 8929-7676 Website: www.bir.gov.ph

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Documents show that CDPQ is a mandatary of the State of Quebec and property belonging to it shall be the property of the state. The affairs of CDPQ government of Quebec. CDPQ is mandated to submit to the Minister of Finance before April 15 each year a report on its operations for the previous year which shall be forthwith jaid before the National Assembly. are administered by a board of directors, which are duly appointed by the

5. CDPQ is considered as a resident of Canada for tax purposes as evidenced by a Certificate of Canadian Residency. It is not registered with the Philippine Securities and Exchange Commission to engage in any kind of trade or business in the Philippines. 6. Pursuant to its mandate, CDPQ.made several investments in various instruments and securities in the Philippincs, for which it carns incomc such as dividends and interests.

Discussion/Ruling

Revenue Code of 1997, as amended (Tax Code), provides that income derived from investments in the Philippines in loans, stocks, bonds or other domestic securitics, or from interest on deposits in banks in the Philippines by (i) forcign governments, (ii) financing institutions owned, controlled, or enjoying refinancing from foreign governments, and (iii) international or regional financial institutions established by foreign governments shall be exempt from taxation. In reply, pleasc be informed that Section 32 (B)(7)(a) of the National Internal

States. For this purpose. the US IRC defines "foreign government" to includc only the sovereign, in general, is any person, body of persons, organization, agency, bureau, fund, authority of a foreign country. The nct earnings of the governing authority must be credited to its own account or to other accounts of the foreign sovereign, with no portion benefiting any private person. A controlled entity of a forcign sovereign is an entity that is separate in form from thc foreign sovereign or otherwise constitutes a separate juridical entity only if: Code (IRC) froin which'our Tax Code is closely patterned. Section 892 of the IRC exempts from tax, payiments to a foreign government (including a foreign central bank of issue wholly owncd by a foreign sovereign) from investments in the United States in stocks, bonds, other domestic securitics, financial instruments held in the cxecution of governmental financial or imonetary policy, and interest on deposits in banks in the United integral parts or controlled entities of a foreign sovereign. An integral part of a foreign instrumentality, or other body. however designated. that constitutes a governing The above-cited provision is similar to Section 892 of the US Internal Revenue

It is wholly owned and controlled by the foreign sovercign directly or indirectly through one or more controlled entities: It is organized under the laws of the foreign sovereign by which it is owned; Its net earnings are credited to its own account or to other accounts of the foreign sovereign, with no portion of its income inuring to the benefit of any private person; and

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Its assets vest in the foreign sovereign upon dissolution.2

"government instrumentality" is defined as follows: On the other hand, Section 2(10) of the Administrative Code of 1987,

corporate powers, administering special funds, and enjoying operational agencies, chartered institutions and government-owned or controlled special functions or jurisdiction by law, cndowed with some if not all autonomy, usually through a charter. This term includes regulatory Government not integrated within the department framework, vested with corporations." "10 Instrumentality refers to any agency of the National

Government, Section 2(4) of the same Code defines "agency" to wit: In relation to Section 2(10) which makes reference to agency of the National

the Government, including a department, bureau, office, instrumentality, or government-owned or controlled corporation, or a local government or a distinct unit therein." (emphasis supplied) "(4) Agency of the Government refers to any of the various units of

by an Act of the National Assembly of Quebec, it is a government agency or instrumentality of the Statc of Quebec, hence,falls within the purview of foreign governments as contemplated under Section 32 (B(7a)i of the Tax Code. Consequently, income carned by CDPQ from all investments in the Philippines (including but not limited to, intcrest and dividends) shall be exempt from Philippine income tax and withholding taxes. Considering thaf CDPQ is a government-owned autonomous corporation created

However, if upon investigation, it will be ascertained 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,

K- Comanssioner of Internal Revenue ROMEOD.LUMAGUI,JR

2 https://www.irs.gov/instructions/iw8exp