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HMRC internal manual

Double Taxation Relief Manual

From
HM Revenue & Customs
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DT: Philippines: double taxation agreement, Article 9: Dividends

(1) Dividends derived from a company which is a resident of the Philippines by aresident of the United Kingdom may be taxed in the United Kingdom. Such dividends may alsobe taxed in the Philippines but where such dividends are beneficially owned by a residentof the United Kingdom the tax so charged shall not exceed:

  1. 15 per cent of the gross amount of the dividends if the beneficial owner is a company which controls directly or indirectly at least 10 per cent of the voting power in the company paying the dividends;

  2. in all other cases 25 per cent of the gross amount of the dividends.

(2) Dividends derived from a company which is a resident of the United Kingdom by aresident of the Philippines may be taxed in the Philippines. Such dividends may also betaxed in the United Kingdom and according to the laws of the United Kingdom but where suchdividends are beneficially owned by a resident of the Philippines the tax so charged shallnot exceed:

  1. 15 per cent of the gross amount of the dividends if the beneficial owner is a company which controls directly or indirectly at least 10 per cent of the voting power in the company paying the dividends;

  2. in all other cases 25 per cent of the gross amount of the dividends.

(3) However, as long as an individual resident in the United Kingdom is entitled to atax credit in respect of dividends paid by a company resident in the United Kingdom, thefollowing provisions of this paragraph shall apply instead of the provisions of paragraph(2) of this Article:

  1.  

(i) Dividends derived from a company which is a resident of the United Kingdom by a resident of the Philippines may be taxed in the Philippines.

(ii) Where a resident of the Philippines is entitled to a tax credit in respect of such a dividend under sub-paragraph (b) of this paragraph tax may also be charged in the United Kingdom and according to the laws of the United Kingdom on the aggregate of the amount or value of that dividend and the amount of that tax credit at a rate not exceeding 25 per cent.

(iii) Except as provided in sub-paragraph (a)(ii) of this paragraph, dividends derived from a company which is a resident of the United Kingdom and which are beneficially owned by a resident of the Philippines shall be exempt from any tax in the United Kingdom which is chargeable on dividends.

  1. A resident of the Philippines who receives dividends from a company which is a resident of the United Kingdom shall, subject to the provisions of subparagraph (c) of this paragraph and provided he is the beneficial owner of the dividends, be entitled to the tax credit in respect thereof to which an individual resident in the United Kingdom would have been entitled had he received those dividends and to the payment of any excess of such credit over his liability to United Kingdom tax.

  2. The provisions of sub-paragraph (b) of this paragraph shall not apply where the beneficial owner of the dividends is a company which either alone or together with one or more associated companies controls directly or indirectly at least 10 per cent of the voting power in the company paying the dividends. For the purpose of this paragraph two companies shall be deemed to be associated if one controls directly or indirectly more than 50 per cent of the voting power in the other company, or a third company controls more than 50 per cent of the voting power in both of them.

(4) The term `dividends` as used in this Article means income from shares, or otherrights, not being debt-claims, participating in profits, as well as income from corporaterights assimilated to income from shares by the taxation law of the State of which thecompany making the distribution is a resident and also includes any other item (other thaninterest relieved from tax under the provisions of Article 10 of this Convention) which,under the law of the Contracting State of which the company paying the dividend is aresident, is treated as a dividend or distribution of a company.

(5) The provisions of paragraphs (1), (2) and (3) of this Article shall not apply if thebeneficial owner of the dividends, being a resident of a Contracting State, carries on atrade or business in the other Contracting State of which the company paying the dividendsis a resident, through a permanent establishment situated therein, or performs in thatother State professional services from a fixed base situated therein and the holding inrespect of which the dividends are paid is effectively connected with such permanentestablishment or fixed base. In such a case the provisions of Article 7 or 13, as the casemay be, shall apply.

(6) Where a company which is a resident of a Contracting State derives profits or incomefrom the other Contracting State, that other State may not impose any tax on the dividendspaid by the company except insofar as the holding in respect of which the dividends arepaid is effectively connected with a permanent establishment or a fixed base situated inthat other State, nor subject the company’s undistributed profits to a tax onundistributed profits, even if the dividends paid or the undistributed profits consistwholly or partly of profits or income arising in that other State.