David Cagahastian

October 27, 2014

Internal Revenue Commissioner Kim Henares has issued a circular establishing pre
sumptions that will determine the kind of taxpayers involved as payees in the pa
yment of dividends to Philippine Central Depository (PCD) nominees.
Henares issued Revenue Memorandum Circular No. 73-2014 determining the taxpayer
involved as payees when withholding agents declare only PCD Nominees as recipients
of dividend income.
The circular was issued amidst a pending court case filed to invalidate another
revenue regulation which required withholding agents to submit an alphabetical l
ist (alpha list) of their payees of dividend income, instead of merely lumping s
uch payments under entries such as various employees, various payees, or PCD Nominees
.
The circular establishes presumptions on the kind of taxpayer involved as payee
in the payment of dividend income to PCD Nominees, and imposes the corresponding t
ax rate on such dividend income based on the kind of taxpayer that the payee is
presumed to be.
The circular presumes that if the payee is declared by issuers of securities as P
CD Nominee-Filipino, then the taxpayer is deemed as an individual and not a domes
tic corporation, which is not subject to tax on the dividends that it receives f
rom another domestic corporation.
If the payee is PCD Nominee-Non-Filipino, then the taxpayer is deemed as a non-res
ident foreign corporation subject to the 30 percent final withholding tax on the
dividend payment.
In case of PCD Nominee-Filipino, unless it is satisfactorily shown that the actua
l equity investor is a domestic corporation, the income recipient is deemed to b
e an individual subject to final withholding tax of ten percent under Section 24
(B)(2) of the Tax Code, the circular said.
Further, in case of PCD Nominee-Non-Filipino, unless it is satisfactorily shown t
hat the actual equity investor is resident alien, non-resident alien whether eng
aged or not engaged in trade or business in the Philippines, or resident foreign
corporation, the income recipient is deemed to be a non-resident foreign corpor
ation subject to final withholding tax of 30 percent under Section 28(B)(1) of t
he Tax Code, the circular added. (David Cagahastian)