Possibility of Paying Dividends Abroad
A Philippine domestic corporation is allowed to distribute dividends to a foreign corporate shareholder. There is no restriction that dividends must be paid only to local shareholders.
💰 2. Withholding Tax on Dividends Paid to Foreign Companies
Dividends paid from a Philippine company to a non-resident foreign corporation are subject to:
- Standard withholding tax (WHT): 25%
Applicable when no treaty or special conditions apply.
- Reduced rate: 15% (Tax Sparing Rule)
This lower rate applies if the foreign shareholder’s home country grants a tax credit for the Philippine tax “spared” (or would have been granted one).
This is the most commonly used reduction.
- Possible lower rates under a Double Tax Treaty (DTA): 10–15%
Applicable if a tax treaty exists between the Philippines and the foreign country, subject to conditions such as:
- beneficial ownership,
- minimum shareholding thresholds,
- residency certification.
⚠️ 3. Key Constraints When Repatriating Dividends
- Withholding must be remitted to the Bureau of Internal Revenue (BIR)
Before remitting funds abroad, the Philippine company must file and pay the withholding tax.
- Documentation requirements
This often includes:
- Board resolution or shareholder approval of dividend declaration
- BIR forms (e.g., WHT filing)
- Proof of tax payment
- Certificate of foreign residency (if using treaty benefits)
- Proof of beneficial ownership
- Foreign exchange regulations
Transfers must go through:
- an authorized local bank, and
- follow Bangko Sentral ng Pilipinas (BSP) rules.
If the investment was registered with the BSP or the local bank, the remittance process is easier and more automatic.
🏛️ 4. Special Case: Branch Offices
If the foreign entity operates in the Philippines through a branch rather than a subsidiary, the transfer of profits is not considered a “dividend.” Instead, it is subject to:
- Branch Profit Remittance Tax (BPRT): generally 15%
(Unless the branch is under certain special economic zone regimes.)
📌 Summary
Yes, dividends can be paid from a Philippine company to a foreign parent company, but:
- A withholding tax of 25% applies by default.
- This can be reduced to 15% (tax sparing) or even 10–15% if a tax treaty applies.
- Remittance must follow BIR tax compliance and foreign exchange control procedures.
- Proper documentation is critical.
For any information, please contact our team to info@opkofinance.com
