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In a corporate world, dividends is not a new topic. As a matter of fact, it is one of the major consideration for an investor to purchase shares of stock of a company represents the share in the net earnings distribution of a stockholders who own shares of stocks of a company. It could be in the form of cash, property, company own shares or stock dividends and liquidating dividends upon liquidation and dissolution. It is basically sourced from the unrestricted or free retained earnings the company made available through an action of the Board of irectors.
!a"ability !a"ability of cash cash and#or property property dividends dividends would normally normally depend depend on the classi$cation classi$cation of the company and the recipient stockholders. stockholders. %ompany for determining determining ta" on dividends may be classi$ed as either a domestic corporation as a foreign corporation. &tockholders may be classi$ed as either an individual o corporation, and the latter may further be classi$ed as a domestic corporation, resident foreign, and nonresident foreign corporation. etermining the classi$cation would depend on the state where the same is organi(ed or constitu and e"isting. omestic corporations are those organi(ed and e"isting under the laws of the )hilippines. !hose organi(ed and e"isting under the laws other than t )hilippines are referred to as foreign corporation. *oreign corporations doing business in the )hilippines are normally classi$ed as resident foreign corporation otherwise, the same shall be referred to as a nonresident foreign corporation.
ividends distributed distributed by a +-&!I% corporation to the following stockholders stockholders a ta"ed as follows
/ Individuals, whether )inoy or not, is subject to 0123
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/ omestic corporations e"empt3
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/ 4esident foreign corporation -5-)! from income ta"3 and
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/ )inoy individuals not a resident of the )hilippines is -5-)! from income ta"3
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/ omestic corporations subject to 912 corporate income ta"3 / 4esident foreign corporation is -5-)! from income ta"3 and / 6onresident foreign corporation is -5-)! from income ta".
&tock dividends are, as a rule -5-)! from income ta" as there is no ;ow of wea to the stockholder before and after the stock dividend. !he increase in the numb of shares as a result of the stock dividend is not necessary income until after suc shares are actually sold. , then, the same shall be ta"ed in the same manner above.
!a"es a?ects lives, dare to care for ta"es and save lives@ %lick here for more.
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!hrough the years, foreign investment in )hilippine domestic companies through shareholdings provides a signi$cant factor in the countrys economic growth. Cike their local counterparts, foreign investors acquire shares as incorporators and#or and stockholders in newlyregistered and e"isting domestic stock corporations Sign up to vote on this title domestic partnerships, and receive a return of their investments in the form of Useful Not useful dividends, which is a ta"able income under )hilippine ta" laws.
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percent =:12>, which represents the di?erence between the regular income ta" thirty$ve =972> and the $fteen percent =072> ta" on dividends.
-?ective anuary 0, :11E, the credit against the ta" due shall be equivalent to $fteen percent =072>, which represents the di?erence between the regular incom ta" of thirty percent =912> and the $fteen percent =072> ta" on dividends.
In recent years, the grant of this preferential ta" rate became the subject of administrative and judicial claims for refund or issuance of a ta" credit certi$cate =!%%>. But when does a nonresident foreign corporation become entitled to the 072 *G! rateH oes it need a prior ruling from the Bureau of Internal 4evenue =BI4> in order to avail of this bene$tH !hese issues were squarely addressed by t %ourt of !a" Appeals in the very recent case of Interpublic 8roup of %ompanies, I vs. %ommissioner of Internal 4evenue =%!A %ase 6o. FFE dated *ebruary :0, :100>.
You're Reading a Preview In this case, a J& corporation which owns thirty percent =912> of the total and outstanding voting capital stock of afull )hilippine company $led a claim Unlock access with aadvertising free trial. the refund or issuance of a !%% for overpaid *G! on dividends withheld and remitted by the )hilippine company. In the administrative claim, the J& corporat Download With Free Trial alleged that, as a nonresident foreign corporation, it may avail of the preferentia *G! rate of 072 on cash dividends received from a domestic corporation during ta"able year :11, pursuant to &ection :D =B>=0> and =7>=b> of the !a" %ode of 0E Sign up to vote on this title
!he %ommissioner of Internal 4evenue =%I4>, for her part, maintained Useful Not useful that in an action for refund, the burden of proof is on the ta"payer to establish its right to refund and the failure to sustain the burden is fatal to the claim. Among others,
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not require that the J& ta" law must give a Ndeemed paid ta" credit for the dividend ta" =:1 percentage points> waived by the )hilippines in making applica the preferred dividend ta" rate of 072. !he !a" %ode does not require that the J law deem the parentcorporation to have paid the :1 percentage points of divide ta" waived by the )hilippines. !he !a" %ode only requires that the J& Nshall allow the J& corporation a Ndeemed paid ta" credit in an amount equivalent to the :1 percentage points waived by the )hilippines.O !he %ourt stated further that Mbot =i> the ta" credit for the )hilippine dividend ta" actually withheld and =ii> the ta" credit for the )hilippine corporate income ta" actually paid by the )hilippine domestic corporation but Ndeemed paid by the J& corporation are ta" credits available or applicable against the J& corporate income ta" of the J& corporatio
!hus, the %!A concluded that if the country of domicile of the recipient corporati allows a credit against the ta" imposable by it an amount equivalent to :12 of th dividends remitted from a )hilippine domestic corporation to corporations domic therein, the dividends remitted are subject to *G! at the preferential rate of 072 accordance with &ection :D =b>=7>=b> of the !a" %ode of 0EEF, as amended. As previously con$rmed by the BI4 in I!A 4uling 6os. 0F711 and 1EF1, dated 6ovember 0L, :111 and AugustYou're :7, :11, respectively, Reading a Preview a corporation which was incorporated under the J& laws, is subject to 072 *G! rate of the amount of Unlock :D full access with a free=7>=b> trial. of the !a" %ode of 0EEF, dividend received based on &ection =B>=0> and amended. =6.B. !he *G! on dividends on )hilippinesource dividends derived by With Freeto Trial nonresident foreign corporationDownload shall be reduced 072 if the country of domicil the nonresident foreign corporation receiving the dividends allows =as a credit against the ta" due in the recipient's home country> a deemed paid ta" equivale to 072 beginning anuary 0, :11E.> Sign up to vote on this title
useful Useful with Notthe +n the issue of whether a prior ta" treaty relief application I!A is requi before $ling an administrative claim for ta" refund, the %!A ruled that the same i not necessary, stating that the basis of the claim for refund is &ection :D =B>=0> a
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for ta" refund or issuance of !%%, especially those involving J& shareholders in )hilippine companies.
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