BIR Ruling No. 326-2020

REPUBLIC CF THE HILIPPINES

DEPARTMENTOF FINANCE

BUREAU OF INTERNAL REVENUE

Quezon City

Sec.28B5b

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

OT-0326-2020 JUN T 5 2020

R.G. MANABAT & CO.

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

Attention:Atty. Maria Georgina J. Soberano

Principal, Tax

Gentlemen:

This refers to your letter dated 24 September 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 (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".

It is represented that LGCI is a non-resident foreign corporation organized and

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

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 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 15 September 2015, the Board

resolved that of the cash dividends in the amount of USD to be distributed. the

equivalent of 15% thereof or USD I will be distributed and paid to LGCI on or

before 30 September 2015; and that the Department of Inland Revenue of the Government

U

OT-0326-2020 JUN 1 5 2020

LaPrairie Group Contractors International Ltd. 24 September 2015 Page 2 of 4

the non-resident Philippine Company will not be included in the assessable income of the of 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

corporation, which shall be collected and paid as provided in country in which the non-resident foreign corporation is rate of fifteen percent (15%) is hereby imposed on the amount of cash and/or property dividends received from a domestic Section 57(A) of this Code, subject to the conditions that the domiciled, shall allow a credit against the tax due from the (b) Inter-corporate Dividends. -- A final withholding tax at the

non-resident foreign corporation taxes deemed to have been

which represents the difference between the regular income paid in the Philippines equivalent to twenty percent (20%), tax of thirty-five percent (35%) and the fifteen percent (15%)

the difference between the regular income tax of thirty percent that effective January 1, 2009 the credit against the tax due tax on dividends as provided in this subparagraph; Provided. shall be equivalent to fifteen percent (15%), which represents

(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 April 15, 1988), ruled that--- In stressing the rationale of the above provisions, the Supreme Court in the case of

0T-0326-2020 JUN 1 5 202

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

the Philippines, the condition imposed under the abovementioned sectionis satisfied. Accordingly, the tax on the dividends to be received by the said corporation in withholding tax rate of fifteen percent (15%) is hereby 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 affiliate in accordance with the provisions of the Income Tax will not be subject to tax on dividends from its non-resident 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

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

(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 least ten percent (10%) of the capital of the non-resident the Barbados resident is a shareholder representing at

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.

Tum' i 1

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

Income Tax Act Cap 73 Section 9 (1)(1)(iii), this Office hereby confirms your opinion that 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 2015 to be received by LGCI on or before 30 September 2015 are subject to fifteen percent as amended. (BIR Ruling No. 378-13 dated October 11, 2013; BIR Ruling No. 374-13 dated (15%) final withholding tax imposed under Section 28 (B)(5(b) of the Tax Code of 1997, cash dividends in the amount of USD 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 15 September

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.

maisaie Very truly yours,

Commissioner of Internal Revenue CAESAR R.DULAY 034312

K-1-JAC