BIR Ruling

October 22, 1973 Sycip, Gorres, Velayo & Co. P. O. Box 589, Manila Gentlemen : This refers to your letters dated June 12 and August 1, 1973 requesting information whether the proceeds from the sale of capital assets owned by Filipino citizens which will be used to purchase USI-ASIA stocks in USIPHIL, Inc., are exempt from capital gains tax. Pursuant to Section 4.A.9 of Revenue Regulations No. 7A-72 dated November 16, 1972, implementing Presidential Decree Nos. 16 and 16-A, the gains derived are exempt from tax if the proceeds are used in the purchase of foreign equity in domestic/resident corporations. cdta It is represented that USIPHIL, Inc., a domestic corporation, is wholly-owned by USI-Asia Pacific Inc., also a domestic corporation. The latter, in turn is wholly-owned by USI International, Inc. a corporation organized under the laws of Delaware, U.S.A. In reply, I have the honor to inform you that foreign equity referred to in the regulations means stocks owned by a foreign corporation in a domestic corporation. In the instant case, although the USI-ASIA stocks in USIPHIL are owned by a domestic corporation, the latter is wholly owned by a foreign corporation. Accordingly, USI-ASIA stocks in USIPHIL are, in effect, owned by a foreign corporation and, therefore, considered foreign equity. aisadc In view thereof, your query is answered in the affirmative. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue TAN-1601-593-5 "TAXPAYERS SHOULD INDICATE THEIR TAN IN ALL COMMUNICATIONS TO THE BIR."