Dividends

Declaration Date	Record Date	Payment Date	Amount
24-Mar-15	26-Jun-15	10-Jul-15	0.0039
28-Feb-17	17-Mar-17	03-Apr-17	0.004805
25-Apr-17	26-Jun-17	10-Jul-17	0.0039
27-Feb-18	14-Mar-18	2-Apr-18	0.004805
27-Feb-18	26-Jun-18	10-Jul-18	0.0039
19-Feb-19	18-Mar-19	1-Apr-19	0.004805
19-Feb-19	26-Jun-19	10-Jul-19	0.0039
21-Feb-20	18-Mar-20	1-Apr-20	0.004805
21-Feb-20	26-Jun-20	10-Jul-20	0.0039
23-Feb-21	18-Mar-21	5-Apr-21	0.004805
23-Feb-21	28-Jun-21	12-Jul-21	0.0039
22-Feb-22	18-Mar-22	1-Apr-22	0.004805
22-Feb-22	27-Jun-22	11-Jul-22	0.0039
28-Feb-23	20-Mar-23	3-Apr-23	0.004805
28-Feb-23	26-Jun-23	10-Jul-23	0.0039
27-Feb-24	14-Mar-24	1-Apr-24	0.004805
27-Feb-24	26-Jun-24	20-Jul-24	0.0039
25-Feb-25	11-Mar-25	1-Apr-25	0.004805
25-Feb-25	26-Jun-25	10-Jul-25	0.0063

 

Declaration Date	Record Date	Payment Date	Amount
26-Mar-96	30-May-96	1-Jul-96	20%
29-Apr-97	11-Jun-97	30-Jun-97	20%
26-May-98	17-Aug-98	18-Sep-98	13.75%
31-Mar-11	5-Aug-11	1-Sep-11	20%
19-Mar-13	2-Dec-13	1-Jan-14	20%

 

FAQs / Guide for Investors and Brokers on Documentary Requirements for Tax Relief, Tax Sparing, Tax Exemption, and Other Matters Relevant to Security Bank Corporation (SECB) Dividends

What are the respective final withholding tax rates in the Philippines for cash dividends?

The final withholding tax rates prescribed under the Philippine National Internal Revenue Code (NIRC) are:

Taxpayer	Final Withholding Tax (FWT) Rate
A. Non-Resident Foreign Investor
Corporation	a.      Twenty Five Percent (25%); b.     If the Tax Sparing requirement [under Section 28(B)(5)(b), NIRC] is complied with [i.e., that the country of residence of the Non-Resident Foreign Corporation (NRFC) allows a deemed paid tax credit of fifteen percent (10%) on taxes due from the NRFC]: Ten percent (15%); Refer below for the availment of Tax Treaty and Tax Exemption benefits.
Individual	a.      Engaged in trade or business in the Philippines – Twenty percent (20%); b.     Not engaged in trade or business in the Philippines–Twenty-five (25%); Refer below for the availment of Tax Treaty and Tax Sparing benefits.
B. Resident Foreign Investor
Corporation	Not subject to tax
Individual	Ten percent (10%)
C. Domestic Investor
Corporation	Not subject to tax
Individual Citizen	Ten percent (10%)

 

Are there Tax Reliefs available to non-resident foreign shareholders for income received thru dividends?

Yes. Non-resident foreign stockholders (individual or corporation) (see item A of Table above) may claim partial relief through tax treaties and tax sparing provisions, or exemption, see items 1 to 3 below.

1.     AVAILMENT OF PREFERENTIAL TAX TREATY BENEFITS ON DIVIDENDS

(a)   What is a Tax Treaty?

 A tax treaty is an agreement entered into between sovereign states “for purposes of eliminating double taxation on income and capital, preventing fiscal evasion, promoting mutual trade and investment, and according fair and equitable tax treatment to foreign residents or nationals

(b)   Who can apply for Preferential Tax Treaty Benefits?

Non-resident stockholders (individual or corporation) or their duly authorized representative who derives income from Philippines and whose country of residence has an effective tax treaty with the Philippines. As of March 10, 2021, the Philippines have effective tax treaties with the following countries:

 

• Australia
• Austria
• Bahrain
• Bangladesh
• Belgium
• Brazil
• Brunei Darussalam
• Canada
• China
• Czech Republic
• Denmark
• Finland
• French Republic (France)
• Germany
• Hungary
• India
• Indonesia
• Israel
• Italy
• Japan
• South Korea
• Kuwait
• Malaysia
• Mexico
• Netherlands
• New Zealand
• Nigeria
• Norway
• Pakistan
• Poland
• Qatar
• Romania
• Russian Federation (Russia)
• Singapore
• Spain
• Sri Lanka
• Sweden
• Swiss Confederation (Switzerland)
• Thailand
• Turkey
• United Arab Emirates
• United Kingdom of Great Britain and Northern Ireland
• United States of America
• Vietnam

 

(c)   What are the requirements to apply the Preferential Tax Treaty Rate on dividends?

1. Pursuant to RMO 14-2021¹, a non-resident taxpayer applying for the preferential tax treaty rate on dividends for the first time must submit the following required documents to SECB (the withholding agent) within five (5) banking days from the dividend record date:

¹ Dated March 31, 2021, this RMO streamlines the procedures and documents for the availment of Treaty Benefits. Under this RMO, the income payor/withholding tax agent, by relying on the submitted BIR Form No.0901-D, and TRC provided by the non-resident taxpayer, may apply the reduced tax treaty rate without securing first a BIR ruling from the BIR. A comparison of the requirements under RMO 8-2017 and RMO 14-2021 is provided in Annex A.

• Submitted BIR Form No. 0901-D/Application Form for Treaty Purposes if there is any, or accomplished Application Form (BIR Form 0901-D) duly signed by the non-resident stockholder or its/his/her authorized representative (See Annex B for the BIR Form 0901-D)
• Copy of Tax Residency Certificate (TRC) duly issued by the foreign tax authority; and
• Consularized Indemnity Undertaking

Since the new procedure allows immediate availment of preferential rates subject to compliance check by the BIR, the non-resident investor is required to submit a Consularized or apostilled Indemnity Undertaking in the event that SECB is assessed by the BIR during examination on account of stockholder’s failure to supply accurate and complete information.

Please refer to Annex C for the prescribed form of the Indemnity Undertaking.

2.     Requirements after payment of dividends by SECB:

2.1  Documents to be provided by nonresident foreign stockholder to SECB

 Once the reduced tax treaty rate on dividends is applied and the income is paid to the non- resident stockholder/s, the stockholder or its duly authorized representative shall provide the following documents to SECB within 30 banking days from receipt of dividend income from SECB:

 

a. Apostilled or Consularized Tax Residency Certificate (TRC) for the relevant period, duly issued by the tax authority of the foreign country in which the income recipient is a resident;

b. Notarized Special Power of Attorney (SPA) issued by the nonresident taxpayer to his/her authorized representative(s), which shall expressly state the authority to sign the Application Form as well as to file the TTRA or request for confirmation (if item a will be accomplished by the authorized representative e.g. local custodian); and

d. Notarized Special Power of Attorney (SPA) issued by the nonresident taxpayer to SECB and SECB’s authorized representative as the withholding agent, which shall expressly state the authority to file the TTRA and request for confirmation.

1. Proof that the shareholding in respect of which the dividends are paid is not effectively connected with the permanent establishment (PE) of the foreign enterprise in the Philippines, such as [Q14 of Revenue Memorandum Circular (RMC) No. 14-2021]:
   1. Certified true copy of Audited FS of the PE related to the period such dividend was received; or
   2. Sworn Certification signed by the principal officer of the PE which shall contain material facts that may lead the BIR to prove that the income is not effectively connected with the PE and such PE is not material to the realization of the dividends.

e. Authenticated copy of the nonresident legal person or arrangement’s Articles/Memorandum of Incorporation/Association, Trust Agreement, or equivalent document confirming its establishment or incorporation, with an English translation thereof if in foreign language.

f. Original copy of the Certificate of Non-Registration of Company or certified true copy of License to Do Business in the Philippines duly issued by the Securities and Exchange Commission (SEC) for legal persons and arrangements, or original copy of the Certificate of Business Registration/Presence duly issued by the Department of Trade and Industry (DTI) for individuals

All documents executed in a foreign country must either be authenticated by the Philippine Embassy stationed therein or apostilled if the said country is a signatory to the Convention Abolishing the Requirement of Legalization for Foreign Public Documents (HCCH 1961 Apostille Convention) in order to be acceptable (Section 5 of RMO No. 14-2021). Such document shall be applicable to dividends received for the whole Calendar Year (Q9 of RMC No. 77-2021 dated June 17, 2021)

2.2   SECB submission of application confirmation to BIR

After receiving the above requirements, SECB, as withholding agent, shall file with the BIR a request for confirmation supported by the following documentary requirements:

 a.Letter request issued by SECB for the confirmation of tax

b. BIR Form 0901-D duly signed by the nonresident income recipient or its/his/her authorized representative;

c. Apostilled or Consularized Tax Residency Certificate (TRC) for the relevant period, duly issued by the tax authority of the foreign country in which the income recipient is a resident;

d. Certified true       copy       of       bank       documents/certificate        of       deposit/telegraphic transfer/telex/money transfer evidencing the payment/remittance of income;

e. Certified true copy of withholding tax return with Alphalist of Payees;

f. Certified true copy of proof of payment of withholding tax;

g. Notarized Special Power of Attorney (SPA) issued by the nonresident taxpayer to his/her authorized representative(s), which shall expressly state the authority to sign the Application Form as well as to file the TTRA or request for confirmation, if BIR Form 0901-D will be accomplished by the authorized representative; and

h. Notarized Special Power of Attorney (SPA) issued by the nonresident taxpayer to SECB and SECB’s authorized representative, which shall expressly state the authority to file the TTRA and request for confirmation.

 

Additional Requirements:

i. Authenticated copy of the nonresident legal person or arrangement’s Articles/Memorandum of Incorporation/Association, Trust Agreement, or equivalent document confirming its establishment or incorporation, with an English translation thereof if in foreign language.

j. Original copy of the Certificate of Non-Registration of Company or certified true copy of License to Do Business in the Philippines duly issued by the Securities and Exchange Commission (SEC) for legal persons and arrangements, or original copy of the Certificate of Business Registration/Presence duly issued by the Department of Trade and Industry (DTI) for individuals

 Specific Requirements for dividends

k. Board of Directors’ resolution approving the issuance of dividends, which shall include the amount of dividends, and dates of declaration, record and payment, among others

l. Certification under oath by the corporate secretary/custodian banks/depository account holders/broker dealers stating in detail the legal and beneficial owners of all issued and outstanding shares as of record date, their corresponding subscriptions, date/s of acquisition, percentage of ownership and the allocation of dividend

m. Certified true copy of Audited financial statements (AFS) as of the last fiscal year stamped “received” by the BIR and SEC

n. General Information Sheet for the year immediately preceding the date of declaration

o. Proof that the shareholding in respect of which the dividends are paid is not effectively connected with the permanent establishment of the foreign enterprise in the Philippines.

 

(d)   When should SECB, acting as withholding agent, file the request for confirmation of the application of the reduced tax treaty rate?

 The request for confirmation shall be filed by SECB at any time after the payment of withholding tax but shall in no case be later than April 30 of the succeeding taxable year when the dividend income was paid.

“In addition, as amended by RMC No. 20-2022, to limit the number of RFCs and TTRAs filed with ITAD, this Circular is hereby issued to clarify that taxpayers who were already issued with COEs, the tenor thereof allows the ruling to be applied to subsequent or future income payments, shall no longer file an RFC or TTRA every time an income of similar nature is paid to the same nonresident. In applying the confirmed treaty benefit to future income payments, the income payor or withholding agent shall always be guided by the requisites mentioned in the COE. Thus, if the COE mentions tax residency as a requisite for continuous enjoyment of treaty benefit, the income payor must require the nonresident to submit first a Tax Residency Certificate (TRC) for such relevant year before making any payment.

The foregoing shall also apply to the Certificate of Entitlement to the Reduced Dividend Rate issued by the BIR for tax sparing applications.”

 

(e)   What will be the consequence in case the non-resident stockholder fails to submit the documentary requirements provided under paragraph c (1)?

Failure to provide the documentary requirements provided in paragraph c (1) within the period provided therein will imply that the stockholder is not availing the tax treaty benefits and the dividends received will be subjected to 25% FWT.

(f)    Are non-resident stockholders still required to file Tax Treaty Relief Application (TTRA) with the BIR?

No. The non-resident stockholders are not required to file TTRA with BIR (ITAD), provided that SECB has already applied the reduced tax treaty rates in the income received by the stockholder based on complete documentary requirements.

However, if SECB imposed the regular rates on dividends received by a non-resident stockholder and the latter would like to invoke and prove his/her/its entitlement to the treaty benefits, the non-resident stockholder may, at anytime after the receipt of income, file a TTRA with the International Tax Division of BIR to prove its entitlement to treaty benefits.

In case the non-resident stockholder decides to file his/her/its own TTRA, he/she/it or his/her/its authorized representative shall file its own application to the BIR and submit the following documents:

1. Letter request issued by the stockholder or its duly authorized representative for the confirmation of tax treaty.
2. Application Form (BIR Form 0901-D) duly signed by the nonresident income recipient or its/his/her authorized representative.
3. Tax Residency Certificate (TRC) for the relevant period, duly issued by the tax authority of the foreign country in which the income recipient is a resident
4. Bank documents/certificate of deposit/telegraphic transfer/telex/money transfer evidencing the payment/remittance of income
5. Withholding tax return with Alphalist of Payees
6. Proof of payment of withholding tax
7. Notarized Special Power of Attorney (SPA) issued by the nonresident taxpayer to his/her authorized representative(s), which shall expressly state the authority to sign the Application Form as well as to file the TTRA or request for confirmation

The following shall be observed in accomplishing BIR Form 0901-D

• This is composed of six (6) parts (as pre-numbered in the form):

Part I:

1. Date of Application Applicable
2. Tax Treaty;
3. Article Invoked
4. Preferential Tax Rate

Part II:

1. Taxpayer’s Name (Income Earner)
2. TIN number of the Income earner, if applicable,
3. Foreign Address of the Income Earner
4. Local Address of the Income Earner
5. Information about the local representative of the Income Earner, if any
6. Permanent Establishment/fixed base in the Philippines information, if any Part II:
7. Taxpayer’s Name (Payor of Income)
8. Address of the Payor of Income Part IV:
9. Details of the transaction (No. of Shares, Types of shares, Percentage of ownership, date of record, date of dividends declaration, date of dividend payment)

Part V:

1. Perjury Declaration

Part VI:

1. List of Documentary Requirements

Additional Requirements:

1. Authenticated copy of the nonresident legal person or arrangement’s Articles/Memorandum of Incorporation/Association, Trust Agreement, or equivalent document confirming its establishment or incorporation, with an English translation thereof if in foreign language.
2. Original copy of the Certificate of Non-Registration of Company or certified true copy of License to Do Business in the Philippines duly issued by the Securities and Exchange Commission (SEC) for legal persons and arrangements, or original copy of the Certificate of Business Registration/Presence duly issued by the Department of Trade and Industry (DTI) for individuals.

Specific Requirements:

1. Board of Directors’ resolution approving the issuance of dividends, which shall include the amount of dividends, and dates of declaration, record and payment, among others.
2. Certification under oath by the corporate secretary/custodian banks/depository account holders/broker dealers stating in detail the legal and beneficial owners of all issued and outstanding shares as of record date, their corresponding subscriptions, date/s of acquisition, percentage of ownership and the allocation of dividend.
3. Certified true copy of Audited financial statements (AFS) as of the last fiscal year stamped “received” by the BIR and SEC.
4. General Information Sheet for the year immediately preceding the date of
5. Proof that the shareholding in respect of which the dividends are paid is not effectively connected with the permanent establishment of the foreign enterprise in the

SECB shall be assisting the stockholder with the documents available on its end.

After receiving the confirmation certificate that the stockholder is entitled to a tax treaty rate, but his/her/its dividend has been subjected to regular rates, he/she/it may subsequently file a claim for refund for the difference between the amount of withholding tax actually paid in the Philippines and the amount of tax that should have been paid under the treaty. For this purpose, a duly accomplished BIR Form No. 1913 shall be filed with the letter request.

The claim for refund may be filed independently of, or simultaneously, with, TTRA. If the claim was not filed simultaneously with the TTRA, the office where it was filed shall coordinate with, and defer to, ITAD the resolution of the nonresident’s entitlement to treaty benefit. If, on the other hand, the claim was filed simultaneously with the TTRA, it shall be the responsibility of ITAD to endorse the claim for refund to the proper office

 (g)   How frequent should a withholding agent or a non-resident stockholder file a request for confirmation or TTRA, respectively?

One TTRA or request for confirmation together with the required attachments shall be filed for “each year but not later than the last day of the fourth month following the close of such taxable year” (as amended by RMC No. 77-2021). Provided that; when the issued TTRA or COE has a tenor thereof allows the ruling to be applied to subsequent or future income payments, it shall no longer file an RFC or TTRA every time an income of similar nature is paid to the same nonresident (as amended by RMC No. 20-2022). 

(h)   Are non-resident stockholders who have previously file TTRAs and secured BIR Rulings still required to follow the guidelines and procedures outlined above?

Yes. Since as stated in paragraph g, the rule is that one TTRA or request for confirmation shall be filed for each year. Except when the tenor of TTRA or COE covers subsequent or future income payments.

 

(i)    What will happen to the duly accomplished BIR Certificate of Residence for Tax Relief (CORTT) submitted to BIR?

Previously submitted CORTT forms shall be forwarded to the concerned Revenue District Offices (RDOs) for compliance check. However, moving forward the submission of CORTT form shall be discontinued in accordance with the transitory provision of RMO No. 14-2021

 

3.   AVAILMENTS OF TAX RELIEF UNDER THE TAX SPARING LAW

 

(a)   What is Tax Sparing rule?

This rule refers to the application of the 15% preferential tax rate on intercorporate dividends (cash and/or property) paid to non-resident foreign corporations under the Tax Code, as amended.

(b)   Who can apply for tax relief under the Tax Sparing provisions of the NIRC?

Any nonresident foreign corporation (NRFC) which is a resident or is domiciled in a country which:

1. Allows the non-resident foreign corporation a “deemed paid” tax credit in amount equivalent to the 10%² waived by the Philippines; or
2. Exempts from tax the dividends (Section 3 (1), RMO No. 46-2020)

(c)   In case the NRFC is entitled to avail of the Tax Sparing Rule but at the same time, the country to which the NRFC is domiciled has a Tax Treaty with the Philippines for a reduced tax rate on dividends, what rule shall apply?

² Tax deemed paid is reduced from 15% to 10% due to the amendment of Section 28 (B)(5)(B) of the NIRC by R.A. No. 115341 otherwise known as the CREATE Bill

The NRFC has the option to avail of the reduced dividend tax rate either under the tax treaty or under the Tax Code (Tax Sparing). However, if the NRFC is not entitled to the reduced tax rate under the tax code, the treaty rate shall automatically be applied provided that the NRFC is able to prove entitlement to the benefits provided under the treaty.

(d)   How to avail of the reduced tax rate under the Tax Sparing rule?

SECB may remit outright the dividends to the NRFC and apply thereon the reduced rate of 15% without securing first a ruling from the BIR, subject to the requirements stated under item (e) below.

 

(e)   What are the requirements for the availment of Tax Sparing?

The NRFC availing tax sparing must comply with BIR RMO No. 46-2020 requiring the submission of the application together with the required documents within (90) days from the date of remittance of the dividends. Since the BIR mandates this as a post-dividend payout requirement, the NRFC shall submit to SECB the following documents as a basis for the 15% Tax Sparing Rate within 5 banking days from dividend record date:

1. Indemnity Undertaking which includes the commitment of the NRFC to provide SECB the documents that will be submitted to BIR pursuant to RMO 46-2020 (Please see Annex D which applies for Tax Sparing); and
2. Duly authenticated or apostilled copy of the law of the country of domicile which either allowing a tax credit for taxes actually paid in the Philippines and for taxes deemed paid in the Philippines equivalent to at least 10% of the dividends, or states that the dividend is exempt from tax in the country of

 

For item i above, NRFC will be bound to provide to SECB the following documents submitted to BIR, thru International Tax Affairs Division, the copy for the proof of its application for tax sparing confirmation together with the required attachments within 5 days from the date that the BIR received such documents:

• For the first application for the reduced dividend rate of 15% in a given taxable year:

– General Requirements

1. Letter request which shall provide a background of the transaction, the relief sought and the legal basis
2. Duly accomplished BIR Form No, 0910-TS
3. Original Copy of the Apostilled/duly authenticated Tax Residence Certificate issued by the tax authority of the country of domicile
4. Apostilled/Duly authenticated copy of the NRFC’s articles of incorporation or proof of establishment in its country of residence
5. Original Copy of apostilled/duly authenticated Special Power of Attorney (SPA) issued by the NRFC to its authorized representative.
6. Certified true copy of the Board of Director’s resolution of the domestic corporation approving the issuance of dividends, which shall include the amount of dividends, and dates of declaration, record and payment, among others.
7. Original copy of the sworn statement executed by the corporate secretary of the domestic corporation/custodian banks/depository account holders/broker dealers stating the legal and beneficial owners, if applicable, of all issued and outstanding shares as of record date, their corresponding subscriptions, date/s of acquisition, percentage of ownership and the allocation of dividend;
8. Certified true copy of the General Information Sheet (GIS) of the domestic corporation for the year or period immediately preceding the date of declaration, whichever is more applicable.
9. Certified true copy of Audited Financial Statement (AFS) of the domestic corporation stamped “received “by the BIR and Securities and Exchange Commission, which was used as the basis of such dividend declaration; and
10. Proof of remittance of the dividend payments

– Special Requirements:

11. If the dividend is taxable in the country of domicile
    • Duly authenticated or apostilled copy of the law of the country of domicile allowing a tax credit for taxes actually paid in the Philippines and for taxes deemed paid in the Philippines equivalent to at least 10% of the dividends; and
    • Duly authenticated or apostilled copy of any document issued by, or filed with, the foreign tax authority showing the amount of deemed paid tax credit annually granted by the foreign tax authority.

12.  If the dividend is exempt from tax in the country of domicile

• A duly authenticated or apostilled copy of the law of the country of domicile; and
• A duly authenticated or apostilled copy of any document issued by the foreign tax authority confirming that the NRFC is exempt from income tax on dividends received from the Philippine corporation.

• For subsequent applications during the taxable year involving the same NRFC:

1. Letter request which shall provide a background of the transaction, the relief sought and the legal basis.
2. Duly accomplished BIR Form No, 0910-TS
3. Original Copy of apostilled/duly authenticated Special Power of Attorney (SPA) issued by the NRFC to its authorized representative, if there is a change in SPA
4. Certified true copy of the Board of Director’s resolution of the domestic corporation approving the issuance of dividends, which shall include the amount of dividends, and dates of declaration, record and payment, among others.
5. Certification under oath by the corporate secretary of the domestic corporation/custodian banks/depository account holders/broker dealers stating the legal and beneficial owners, if applicable, of all issued and outstanding shares as of record date, their corresponding subscriptions, date/s of acquisition, percentage of ownership and the allocation of dividend;
6. General Information Sheet (GIS) for the year or period immediately preceding the date of declaration, if different from previously submitted HGIS
7. Original Copy of the Apostilled/Authenticated certification issued by the NRFC, or its authorized representative, confirming that there is no substantial change in the domestic law of the country of domicile of the NRFC;
8. Apostilled or duly authenticated copy of any document issued by, or filed with, the foreign tax authority showing the amount of deemed paid tax credit actually granted by the foreign tax authority; and
9. Proof of remittance of the dividend payments

 

(f)    When to apply for Tax Sparing confirmation?

A request for confirmation of the applicability of the reduced dividend rate of 15% shall be filed by the NRFC or its authorized representative with the BIR within Ninety (90) days from the remittance of the dividends or from the determination by the foreign tax authority of the deemed paid tax credit/non-imposition of tax because of the exemption, whichever is later

 “In addition, as amended by RMC No. 20-2022, to limit the number of RFCs and TTRAs filed with ITAD, this Circular is hereby issued to clarify that taxpayers who were already issued with COEs, the tenor thereof allows the ruling to be applied to subsequent or future income payments, shall no longer file an RFC or TTRA every time an income of similar nature is paid to the same nonresident. In applying the confirmed treaty benefit to future income payments, the income payor or withholding agent shall always be guided by the requisites mentioned in the COE. Thus, if the COE mentions tax residency as a requisite for continuous enjoyment of treaty benefit, the income payor must require the nonresident to submit first a Tax Residency Certificate (TRC) for such relevant year before making any payment.

(g)   Where to apply for Tax Sparing confirmation?

A request for confirmation of the applicability of the reduced dividend rate of 15% shall be filed by the NRFC or its authorized representative with the BIR, through the International Tax Affairs Division (ITAD)

 (h)   What if the NRFC has already secured a BIR Ruling for Tax Sparing confirmation prior to RMO No. 46-2020?

In case the stockholder has already secure a BIR ruling prior to the implementation of RMO No. 46-2020, the said stockholder shall file a request for confirmation that the same BIR ruling is still applicable with the current dividend payment/transactions.

 4.   AVAILMENT OF TAX EXEMPTION UNDER THE NIRC

 (a)   Who can avail of tax relief under the Tax Exemption provisions of the NIRC?

 The following are exempt from withholding tax as provided in the NIRC or special laws:

1. Foreign government and financing institutions owned, controlled, or enjoying refinancing from foreign governments, and international or regional financial institutions established by foreign governments who derives income within the Philippines

 

2. Any person who derives from any public utility or from the exercise of any essential governmental function accruing to the Government of the Philippines or to any of its political subdivisions thereof;

 

3. Entities enjoying exemption from payment of income taxes, such as entities registered with the BOI, Philippine Economic Zone Authority (PEZA) and Subic Bay Metropolitan Authority (SBMA), non-stock and non-profit corporations, general professional partnerships, and joint ventures under an energy service contract with the government.

 

(b)   What are the requirements for the application of tax exemption?

 

Any stockholder claiming exemption from withholding tax in accordance with any provision of the NIRC or special law shall be required to submit a certified true copy of a BIR ruling addressed to it confirming the exemption claimed pursuant to RMC No. 8-2014.

In the absence of a BIR Ruling, the stockholder may still enjoy tax exemption provided, that he shall submit a certified true copy of the application for BIR Ruling and Consularized Indemnity Undertaking stating among other things that it shall indemnify SECB for any deficiency tax assessment relevant to non-withholding on the dividend payment.

(Please refer to Annex E for the prescribed template of Indemnity Undertaking)

Upon submission of the documents, the Applicant shall be entitled to receive the dividends without deduction for withholding tax. Failure to submit the required documents within five banking days from dividend record date would mean SECB will withhold and remit the taxes at the applicable withholding tax rates of 25%.

(c)   Are Brokers required to submit certain documents relevant to dividend payment?

Yes. Brokers are required to submit to SECB through Stock Transfer, Inc. within five (5) banking days from dividend record date Certifications stating among other things that they have applied the proper withholding tax rates on the dividends to be paid to their various clients and to hold SBC and Stock Transfer, Inc. free and harmless from related penalties and charges they may incur in connection with their reliance on the representations made by the Brokers. Please refer to Annex F for the prescribed template of the Certification.

(d)   What are the documents to be submitted by Stock Transfer Service, Inc. to SECB?

1. For certificated accounts, forward the dividend register with proper tax tagging within three (3) banking days from dividend record date;

 

2. For PCD accounts, forward the credit request letter and withholding tax summary report together with the relevant details within five banking days from dividend record date; and

 

3. Forward all Certifications and BIR Rulings (if any) to SECB within six banking days from dividend record date;

 

Please contact the following persons for further questions and clarifications:

STOCK TRANSFER SERVICE, INC.	SECURITY BANK CORPORATION
Mr. Richard Regala – [email protected] Mr. Bryan Manuel – [email protected]	Mr. Ropi Dangazo – [email protected] Mr. Nelson Ching – [email protected]
34th Floor, Unit D, Rufino Pacific Tower 784 Ayala Avenue, Makati City Tel: (+632) 403-2410; 403-2412 Fax: (+632) 403-2414	8th Floor, Security Bank Centre 6776 Ayala Avenue, Makati City Tel: (+632) 8888-7221; 8888-7175   Atty. Arnaldo V. Domingo [email protected] Mr. Francis Solomon Dela Pena – [email protected] Mr. Franz Angelo Tablanza – [email protected] Mr. Ian Raymund Pabustan – [email protected] 6th Floor, Security Bank Centre 6776 Ayala Avenue, Makati City Tel: (+632) 8867-6788 local 7674 or 8646

 

Annex A – Comparison of the Old and New Practice for Availing Tax Treaty Rates for Dividends

 

Old Practice (RMO No. 8-2017)	New Practice (RMO No. 14-2021)
1.   The nonresident must submit to their withholding agents/income payors either: Ø Duly accomplished Certificate of Residence for Tax Treaty Relief (CORTT) Form, or Ø Prescribed certificate of residency of their country of residence attached to the accomplished Part I (A, B and C) and II of CORTT before the non-resident receives the income.	1. The nonresident must submit to their withholding agents/income payors the following: a. 5 Days after dividend record date: Submitted BIR Form No. 0901-D/Application Form for Treaty Purposes, if there is any; Copy (scanned or photocopy) of Tax Residency Certificate (TRC) duly issued by the foreign tax authority; and Consularized Indemnity Undertaking (Annex C) b. within 30 banking days from receipt of dividend income from SECB: Application Form (BIR Form 0901-D) duly signed by the non-resident stockholder or its/his/her authorized representative; Apostilled or Consularized Tax Residency Certificate (TRC) for the relevant period, duly issued by the tax authority of the foreign country in which the stockholder is a resident; Notarized Special Power of Attorney (SPA) issued by the nonresident taxpayer to his/her authorized representative(s), which shall expressly state the authority to sign the Application Form as well as to file the TTRA or request for confirmation (if item a will be accomplished by the authorized representative e.g. local custodian); and Notarized Special Power of Attorney (SPA) issued by the nonresident taxpayer to SECB and SECB’s authorized representative, which shall expressly state the authority to file the TTRA and request for confirmation. Proof that the shareholding in respect of which the dividends are paid is not effectively connected with the permanent establishment of the foreign enterprise in the Philippines. Authenticated copy of the nonresident legal person or arrangement’s Articles/Memorandum of Incorporation/Association, Trust Agreement, or equivalent document confirming its establishment or incorporation, with an English translation thereof if in foreign language. Original copy of the Certificate of Non-Registration of Company or certified true copy of License to Do Business in the Philippines duly issued by the SEC for legal persons and arrangements, or original copy of the Certificate of Business Registration/Presence duly issued bythe Department of Trade and Industry (DTI) for individuals Note: All documents executed in a foreign country must either be consularized or apostilled, as applicable
2. Withholding agents/income payors can withhold a reduced rate or exempt the non-resident based on the CORTT form submitted to them, hence, RMO 178017 allows IMMEDIATE AVAILMENT of the preferential rates indicated in the CORTT to be included in the BIR Form No. 1601-F and 1604CF of the withholding agent subject to compliance check by the BIR. Thereafter, the CORTT will be submitted by the withholding agent to ITAD and RDO No. 39 within 30 days after payment of withholding taxes due on the income based on tax treaty rates.	2. Withholding agents/income payors can withhold a reduced rate or exempt the non-resident, hence, the new RMO 14-2020 allows IMMEDIATE AVAILMENT of the preferential tax rates. Thereafter, the confirmation thru submission of BIR Form 0901-D will be submitted by the withholding agent to ITAD not later than the last day of the fourth month following the close of each taxable year (April 30) after payment of withholding taxes due on the income based on tax treaty rates.
3. For dividend income purposes, the CORTT Form shall be valid for two (2) years from date of issuance. If a prescribed certificate of residency of the country of residence is used, the date of the validity of such document will prevail over the 2-year period given.	3. The consularized or apostilled Tax Residency Certificate shall be valid for the relevant period, duly issued by the tax authority of the foreign country in which the income recipient is a resident. An apostilled or consularized copy shall be needed for each request for confirmation
4. The withholding agent shall submit an updated part II of the CORTT Form within 30 days after payment of withholding taxes due if the CORTT Form filed with ITAD and RDO No. 39 is used for another dividend payment within the prescribed period of validity.	4. One TTRA or request for confirmation together with the required attachments shall be filed for each dividend payment. The required documents shall be provided to SECB every dividend payment
5. Failure to submit the duly accomplished CORTT form to the withholding agent/income payor would mean that the non-resident is not claiming any tax treaty relief and therefore such income shall be subject to the normal rates provided under the Tax Code, as amended.	5. Failure to submit the initial documents to the withholding agent/income payor would mean that the non-resident is not claiming any tax treaty relief and therefore such income shall be subject to the normal rates provided under the Tax Code, as amended (Currently at 25%).

 

Annex B – TTRA Form

Annex C – Indemnity Undertaking for TTRA Form

Annex D – Indemnity Undertaking for Tax Sparing

Annex E – Indemnity Undertaking for Tax Exemption

Annex F – Certification by Brokers