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    Itad Bir Ruling No. 328-12: September 3, 2012 September 3, 2012

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    nathalie velasquez
    This document is a ruling from the Philippines Bureau of Internal Revenue (BIR) regarding the tax treatment of dividends paid by a Philippines corporation, Team Diamond Holding Corporation (TDHC), to a Netherlands corporation, DGA Ilijan B.V. (DGA BV). The BIR denies DGA BV's claim that the dividends are subject to the preferential 10% tax rate under the Philippines-Netherlands tax treaty. The BIR found that DGA BV filed its tax treaty relief application after the dividend payment, in violation of rules requiring filing before any taxable event. As a result, the dividends will be subject to the standard 30% tax rate

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    Itad Bir Ruling No. 328-12: September 3, 2012 September 3, 2012

    Uploaded by

    nathalie velasquez
    58 views3 pages
    This document is a ruling from the Philippines Bureau of Internal Revenue (BIR) regarding the tax treatment of dividends paid by a Philippines corporation, Team Diamond Holding Corporation (TDHC), to a Netherlands corporation, DGA Ilijan B.V. (DGA BV). The BIR denies DGA BV's claim that the dividends are subject to the preferential 10% tax rate under the Philippines-Netherlands tax treaty. The BIR found that DGA BV filed its tax treaty relief application after the dividend payment, in violation of rules requiring filing before any taxable event. As a result, the dividends will be subject to the standard 30% tax rate

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    35880-2012-ITAD_BIR_Ruling_No._328-1220190228-5466-bqjid4

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    This document is a ruling from the Philippines Bureau of Internal Revenue (BIR) regarding the tax treatment of dividends paid by a Philippines corporation, Team Diamond Holding Corporation (TDHC), to a Netherlands corporation, DGA Ilijan B.V. (DGA BV). The BIR denies DGA BV's claim that the dividends are subject to the preferential 10% tax rate under the Philippines-Netherlands tax treaty. The BIR found that DGA BV filed its tax treaty relief application after the dividend payment, in violation of rules requiring filing before any taxable event. As a result, the dividends will be subject to the standard 30% tax rate

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    58 views3 pages

    Itad Bir Ruling No. 328-12: September 3, 2012 September 3, 2012

    Uploaded by

    nathalie velasquez
    This document is a ruling from the Philippines Bureau of Internal Revenue (BIR) regarding the tax treatment of dividends paid by a Philippines corporation, Team Diamond Holding Corporation (TDHC), to a Netherlands corporation, DGA Ilijan B.V. (DGA BV). The BIR denies DGA BV's claim that the dividends are subject to the preferential 10% tax rate under the Philippines-Netherlands tax treaty. The BIR found that DGA BV filed its tax treaty relief application after the dividend payment, in violation of rules requiring filing before any taxable event. As a result, the dividends will be subject to the standard 30% tax rate

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    September 3, 2012

    ITAD BIR RULING NO. 328-12

    Article 10, Philippines-Netherlands tax treaty

    Sycip Gorres Velayo & Co.


    6760 Ayala Avenue
    1226 Makati City

    Attention: W.U. Villanueva


    Principal, Tax Services

    Gentlemen :

    This refers to your Tax Treaty Relief Application dated January 17, 2012 led on
    behalf of DGA Ilijan B.V. ("DGA BV"), requesting con rmation that the dividend payment
    to be paid by Team Diamond Holding Corporation ("TDHC"), is subject to the
    preferential tax rate of 10 percent, pursuant to the Convention between the Kingdom of
    the Netherlands and the Republic of the Philippines for the Avoidance of Double
    Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income
    ("Philippines-Netherlands tax treaty").
    Facts
    It is represented that DGA BV, situated at Claude Debussylaan 28, 12th Floor
    1082 MD Amsterdam, The Netherlands, is a resident of the Netherlands within the
    meaning of Article 4 of the Philippines-Netherlands tax treaty, per the Declaration of
    Residence issued by the Inspector of the Tax Administration of the Netherlands; that
    DGA BV is a corporation organized and existing under the laws of the Netherlands with
    an authorized capital of Ninety Thousand Euro (EURO90,000), divided into Ninety
    Thousand (90,000) shares of one euro (EURO1.00) per share; that DGA BV is not
    registered either as corporation or as a partnership in the Philippines per certi cation
    issued by the Securities and Exchange Commission dated January 11, 2012; and that,
    on the other hand, TDHC is a corporation organized and existing under the laws of the
    Philippines with o ce address at CTC Building, 2232 Roxas Boulevard, Pasay City,
    Philippines.
    On January 11, 2012, the Board of Directors of TDHC approved and declared
    cash dividends amounting to US$8,577,000.00 out of the unrestricted retaining
    earnings of TDHC in favor of all of stockholders of record as of January 11, 2012,
    payable on or before January 31, 2012 per Secretary's Certi cate dated January 16,
    2012; that DGA BV is the bene cial owner (according to the Declaration of Trust dated
    June 10, 2011 signed by the Mitsubishi Corporation pursuant to the Deed of Exchange
    between Mitsubishi Corporation and DGA BV) of 12,370,684 common shares,
    representing 51.21% of the TDHC total shares; and that a certi cation from Citibank,
    N.A. was submitted as a proof of remittance for the date (January 12, 2012) of
    payment of dividend income to DGA BV.
    Ruling
    Relative thereto, please be informed that Section 14 of Revenue Memorandum
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    Order ("RMO") No. 72-2010, published in the Manila Bulletin on October 20, 2010, and
    effective November 4, 2010, provides that: DaScAI

    "SECTION 14. WHEN AND WHERE TO FILE THE TTRA . —


    All tax treaty relief applications (updated BIR Forms No. 0901-D, 0901-I,
    0901-R, 0901-P, 0901-S, 0901-T, 0901-O and 0901-C) relative to the
    implementation and interpretation of the provisions of Philippine tax treaties shall
    only be submitted to and received by the International Tax Affairs Division (ITAD).
    If the forms of any necessary documents are submitted to any other BIR o ce,
    the application shall be considered as improperly filed.
    Filing should always be made BEFORE the transaction.
    Transaction for purposes of ling the TTRA shall mean before the
    occurrence of the first taxable event .
    Failure to properly le the TTRA with ITAD within the period
    prescribed herein shall have the effect of disqualifying the TTRA under
    this RMO . " (Emphasis Supplied)
    This condition was emphasized by the Court of Tax Appeals in Mirant
    (Philippines) Operations Corporation vs. Commissioner of Internal Revenue (C.T.A.
    Case No. 6382 dated June 7, 2005) where it ruled:
    "However, it must be remembered that a foreign corporation wishing to
    avail of the bene ts of the tax treaty should invoke the provisions of the tax treaty
    and prove that indeed the provisions of the tax treaty applies to it, before the
    bene ts may be extended to such corporation . In other words, a resident or non-
    resident foreign corporation shall be taxed according to the provisions of the
    National Internal Revenue Code, unless it is shown that the treaty provisions apply
    to the said corporation, and that, in cases the same are applicable, the option to
    avail of the tax benefits under the tax treaty has been successfully invoked. ASETHC

    Under Revenue Memorandum Order 01-2000 of the Bureau of Internal


    Revenue, it is provided that the availment of a tax treaty provision must be
    preceded by an application for a tax treaty relief with its International Tax Affairs
    Division (ITAD). This is to prevent any erroneous interpretation and/or application
    of the treaty provisions with which the Philippines is a signatory to. The
    implementation of the said Revenue Memorandum Order is in harmony with the
    objectives of the contracting state to ensure that the granting of the bene ts
    under the tax treaties are enjoyed by the persons or corporations duly entitled to
    the same.
    The Court notes that nowhere in the records of the case was it shown that
    petitioner indeed took the liberty of properly observing the provisions of the said
    order. Petitioner quotes various BIR, as well as ITAD, Rulings issued to several
    foreign corporations seeking for a tax relief from the o ce of the respondent.
    However, not any one of these rulings pertains to the petitioner. It must be
    stressed that BIR rulings are issued based on the facts and circumstances
    surrounding particular issue/issues in question and are resolved on a case-to-
    case basis. It would be thus erroneous to invoke the ruling of the respondent in
    speci c cases, which have no bearing to the case of petitioner." (Underscoring
    ours)

    This decision was also upheld by the Supreme Court in a Resolution (G.R. No.
    168531) dated February 18, 2008.
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    Furthermore, the necessary requirement laid down in RMO 1-2000 is reiterated in
    subsequent rulings of the Court of Tax Appeals: Deutsche Bank AG Manila Branch vs.
    Commissioner of Internal Revenue (C.T.A. Case No. EB 456 dated May 29, 2009), CBK
    Power Company Ltd. vs. Commissioner of Internal Revenue (C.T.A. Case Nos. 6699,
    6844 and 7166 dated March 29, 2010) and Manila North Tollways Corporation vs.
    Commissioner of Internal Revenue (C.T.A. Case No. 7864 dated April 12, 2011).
    In view of the foregoing and considering that the dividends received by DGA BV
    were paid on January 12, 2012 per Certi cation dated May 28, 2012, while the subject
    TTRA was only led on January 17, 2012 , in violation of the requirement of RMO 72-
    2010 that ling of the TTRA should be made BEFORE the transaction, that is the
    payment of dividend, this O ce holds that the subject TTRA is hereby denied.
    Accordingly, said dividend payment shall be subject to tax at the rate of 30 percent as
    provided in Section 28 of the Tax Code of 1997, as amended. HCacTI

    This ruling is issued on the basis of the foregoing facts as represented. However,
    if upon investigation it shall be disclosed that the actual facts are different, then this
    ruling shall be without force and effect insofar as the herein parties are concerned.

    Very truly yours,

    (SGD.) KIM S. JACINTO-HENARES


    Commissioner of Internal Revenue

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