RR No. 5-2023 — Amends RR No. 5-2021 on the requirements in availing the Income Tax exemption of foreign-sourced dividends received by a Domestic Corporation (Published in Manila Times on May 10, 2023) DIgest | Full Text | Annex A | Annex B

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BUREAU OF INTERNAL REVENUE REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE MAY 0 5 2023 :36 Fm T

Quezon City Records mgt. division

March 7,2023

REVENUE REGULATIONS NO. 5-2023

SUBJECT Amending Revenue Regulations No. 5-2021 on the Requirements in

Availing the Income Tax Exemption of Foreign-Sourced Dividends Received by a Domestic Corporation

TO All Internal Revenue Officers and Others.Concerned

National Internal Revenue Code of 1997, as amended, these Regulations are hereby issued to amend certain provisions of Revenue Regulations (RR) No. 5-2021, particularly on the SECTION 1. SCOPE. Pursuant to Section 244, in relation to Section 245, of the

exemption of foreign-sourced dividends. requirements to be complied with by the domestic corporation in order to avail income tax

SECTION 2. AMENDMENT. Section 5 ofRR No. 5-2021 is hereby amended to read as follows:

CORPORATIONS. In general, foreign-sourced dividends received by domestic corporations are subject to income tax. However, the same shall be exempt if all of the following conditions concur: FOREIGN-SOURCEDDIVIDENDSRECEIVEDBYDOMESTIC "SECTION5. EXEMPTION FROM INCOME TAX OF

A. The dividends actually received or remitted into the Philippines are next taxable year from the time the foreign-sourced dividends were received reinvested in the business operations of the domestic corporation within the or remitted;

"B. The dividends received shall be used to fund the working capital domestic subsidiaries and infrastructure project: and requirements: capital expenditures, dividend payments, investment in

C. The domestic corporation holds directly at least twenty percent (20%) in shares during the entire existence of the corporation. value of the outstanding shares of the foreign corporation and has held the the dividends distribution. In case the foreign corporation has been in existence for less than two (2) years at the time of dividends distribution. then the domestic corporation must have continuously held directly at least twenty percent (20%) in value of the foreign corporation's outstanding shareholdings uninterruptedly for a minimum of two (2) years at the time of

be considered as taxable income of the domestic corporation in the year of Absent any one of the above conditions, the foreign-sourced dividends shall

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applicable. actual receipt or remittance, subject to surcharge, interest, and penalties, as

For this purpose. in order to avail of the income tax exemption, the domestic corporation shall:

1. attach a "Sworn Statement", following the template provided in these Regulations (Annex A), to the Annual Income Tax Return (AITR) pertaining to the taxable year in which the foreign-sourced dividends

were received; and

attach to the AITR pertaining to the year immediately following the year

of receipt of the foreign-sourced dividends a "Sworn Declaration"" using template provided herein (Annex B).

income tax exemption. However, in case of partial or non-utilization of the corresponding income tax due thereon, inclusive of surcharge. interest and income tax shall be paid using payment form (BIR Form 0605) penalties, by amending the AITR filed for the particular period. In the event Compliance with the above requirements is sufficient in order to avail of the foreign-sourced dividends.. the.domestic .corporation shall..pay the that the amendment is already_prohibited due to existence of audit. the

Further, no credit or deduction under Section 34(C) of the Tax Code shall be allowed for any taxes of foreign countries paid or incurred by the domestic corporation in relation to the exempt foreign-sourced dividends. Finally, any to the exempt foreign-sourced dividends shall be disregarded in computing the limitations provided under Section 34(C)(4) of the Tax Code. taxes of foreign countries paid or incurred by the domestic corporation in relatior

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are hereby amended, modified or repealed accordingly. issuances, rulings or parts thereof, which are contrary to or inconsistent with these Regulations SECTION 3. REPEALING CLAUSE. All existing rules, regulations, revenue

days following its publication in the Official Gazette or in a newspaper of general circulation. SECTION 4. EFFECTIVITY. This Revenue Regulations shall take effect fifteen (15)

C 3c BENJAMIN E. DIOKNO

Secretary of Finance

Recommending Approval: APR L 8 2023

Conmissioner of Internal Revenue ROMRO D.L 005965 LUMAGU, JR. RREAUPEIT IFKiUE f

C MAY 05 2023 33Pva8

RECORDS MGI. DIVISION U J71