The same paragraph has a lower rate for someone else
Maricel DizonEditor, cross-border holdingsThe treaty sets one ceiling for an ordinary holder and a lower one for a company that holds a large enough part of the voting stock of the payer. The second is written for corporate shareholdings, not for an individual with a few shares. Mixing them is a costly mistake, and the condition turns on who the holder is and how much of the voting stock they hold.
Two rates in the same paragraph
The same paragraph of the treaty sets two ceilings. One is for a portfolio holder, an individual who holds shares as an investment. The other is for a company that holds a large enough part of the voting stock of the payer. The second rate is lower, and it is written for corporate shareholdings.
An individual with a few shares is a portfolio holder, not a company. The lower rate in the same paragraph does not apply to them. The treaty sets a different ceiling for a different kind of holder, and the two are not interchangeable.
What the condition turns on
The condition for the lower rate turns on two things: who the holder is, and how much of the voting stock they hold. The holder must be a company, and the company must hold a large enough part of the voting stock. The treaty does not set the threshold in words here; the reader should look at the treaty text.
The threshold is a matter of voting stock, not of value. A company that holds a large value of shares but not enough voting stock does not qualify. The condition is specific, and it is not met by accident.
Why mixing them is a costly mistake in one direction
A reader who expects the corporate rate will think something has gone wrong when it is not applied. They may believe the broker has made an error, or that the treaty is not being honoured. The mistake is in the expectation, not in the withholding.
The broker applies the rate for a portfolio holder because the declaration says the holder is a portfolio holder. The corporate rate is not available to an individual, and no declaration can make it available. The holder who expects it will be disappointed, and the disappointment is costly in time and trust.
Why mixing them is a costly mistake in the other direction
A company that holds a large enough part of the voting stock is entitled to the lower rate, but it must say so on the record. A company that signs the portfolio holder's declaration is declaring that it is a portfolio holder, which it is not. The declaration is false, and the company has made a false statement.
The cost of a false declaration is not just the tax. The company may be liable for the tax that was not withheld, and it may face consequences for the false statement. The form must match the holder, and the holder must know which rate they are entitled to.
The table on this site is for a portfolio holder
The table on this site is built for a portfolio holder. The corporate rate is not mixed into it, because it does not apply to the person who will read it. A table that mixed the two rates would give a reader a figure that does not apply to them.
The reader who is a company holding a large enough part of the voting stock should not use this table. They should read the treaty text and the form for a corporate holder. The table is not for them.
How to know which rate is yours
A reader who is an individual holding shares as an investment is a portfolio holder, and the portfolio rate is theirs. A reader who is a company holding a large enough part of the voting stock is a corporate holder, and the corporate rate is theirs. The two are not the same, and the form for one is not the form for the other.
The reader should look at the treaty text and the form. The treaty text says who is entitled to what. The form says what the holder declares. The two must match, and the holder must sign the right one.
What this page turns on
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Questions about the two rates
What is the corporate rate?
The corporate rate is a lower ceiling set by the same paragraph of the treaty for a company that holds a large enough part of the voting stock of the payer. It is not available to an individual with a few shares.
Am I a portfolio holder?
If you are an individual holding shares as an investment, you are a portfolio holder. The portfolio rate is the one that applies to you, not the corporate rate.
What is voting stock?
Voting stock is the class of shares that gives the holder the right to vote on corporate matters. The condition turns on the percentage of voting stock held, not on the value of the shares.
Can I sign the corporate form?
Only if you are a company that meets the voting stock threshold. An individual who signs the corporate form is making a false declaration.
What if I expect the corporate rate but I am an individual?
You should not expect the corporate rate. The broker will apply the portfolio rate because your declaration says you are a portfolio holder. The corporate rate is not available to you.
The account where a position is opened
Opening an account means holding a contract whose value follows a share price, not the share itself. No share is registered in your name, and no dividend is paid to you as a holder. The account is denominated in a foreign currency, so money sent in pesos passes through one conversion before it becomes a balance.