BIR Ruling No. 410-2020

BUREAU OF INTERNAL REVENUE REPUBLIC OF THE PHILIPPINES DEPAR."MENT OF FINANCE

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-0410-2023 JUL 2 4 2OZU

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 23 January 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 April 30, 2014; 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 21 January 2015, the Board resolved

that of the cash dividends in the amount of USD to be distributed, the

equivalent of 15% thereof or USD will be distributed and paid to LGCI on or before 31 January 2015; and that the Department of Inland Revenue of the Government of

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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.

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

rate of fifteen percent (15%) is hereby imposed on the amount (b) Inter-corporate Dividends. -- A final withholding tax at the

corporation, which shall be collected and paid as provided in of cash and/or property dividends received from a domestic

Section 57(A) of this Code, subject to the conditions that the country in which the non-resident foreign corporation is

non-resident foreign corporation taxes deemed to have been domiciled, shall allow a credit against the tax due from the

which represents the difference between the regular income tax on dividends as provided in this subparagraph; Provided, paid in the Philippines equivalent to twenty percent (20%), tax of thirty-five percent (35%) and the fifteen percent (15%) that effective January 1, 2009 the credit against the tax due shall be equivalent to fifteen percent (15%), which represents (30%) and the fifteen percent (15%) tax on dividends. the difference between the regular income tax of thirty percent

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---

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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 affirmed. abovementionedsectionis satisfied.Accordingly,the ...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 will not be subject to tax on dividends from its non-resident Act Cap 73 Section 9 (l) (1) (iii), which stresses that: 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

l)(i)xxx

(ii) x x x (iii) in respect of income year 2007 and subsequent

registered in Barbados as dividends, other "than income years, amounts received by a resident company

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

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) Income Tax Act Cap 73 Section 9 (1)(1)(iii), this Office hereby confirms your opinion that (15%) final 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 cash dividends in the amount of USD 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 31 January 2015 are subject to fifteen percent Based on the foregoing and in view of the fact that LGCI has been certified by the declared by CECWEC on 21 January

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.

naesau1wa Very truly yours.

Commissioner of Internal Revenue CAESAR R. DULAY

K-1-JAC 035805