BIR Ruling [DA-003-06]

January 6, 2006 BIR RULING [DA-003-06] 174; #096-96; DA-326-2005 C&P Homes, Inc . Camella Centre, National Road Talon, Las Pias City Attention: Ms. Estrellita S. Tan Chief Finance Officer Gentlemen : This refers to your letter dated December 16, 2005 requesting for a ruling that the issuance of new shares of stocks, to replace the previously issued and outstanding shares of stocks of C & P Homes, Inc. ("Corporation"), pursuant to a decrease in its capital stock is exempt from the payment of documentary stamp tax. It is represented that C&P HOMES, INC. ("Corporation") is a domestic corporation duly registered with the Securities and Exchange Commission, as holding company; that on September 26, 2005, the majority of the Board of Directors of the Corporation, and with the approval of the stockholders representing at least two-thirds (2/3) of the outstanding and voting capital stock of the Corporation on November 14, 2005, has approved the Decrease in the Authorized Capital Stock of the Corporation from Five Billion Pesos (Php 5,000,000,000.00) divided into Five Billion (5,000,000,000) common shares with a par value of One Peso (Php 1.00) per share to Five Hundred Million Pesos (Php 500,000,000.00) divided into Five Hundred Million (500,000,000) common shares with a par value of One Peso (Php 1.00) per share; that said decrease in Capital Stock was duly approved by the SEC on December 6, 2005; and that the corporation is being required by the SEC to issue new shares of stocks, reflecting the new authorized capital stock of Five Hundred Million Pesos (Php 500,000,000.00), in replacement of the previously issued shares. In reply thereto, please be informed that in BIR Ruling No. 096-96 dated September 3, 1996, this Office had already occasioned to rule on the matter, when it said that "xxx xxx xxx Likewise, the replacement of Stock Certificate is not subject to the documentary stamp tax imposed under Section 176 of the Tax Code, as amended, but only to the documentary stamp tax of P15.00 pursuant to Section 188 of the said Code, as amended by Republic Act No. 7660." CASaEc The same rule was reiterated in BIR Ruling No. DA-326-2005 dated July 22, 2005 which provides, to wit: "In the instant case, the surrender of the certificates of stock by the stockholders of ML&H is a necessary consequence of the decrease in the capital stock of the said corporation. Thus, in order to reflect the corrected number of shares therein, it is required that the stockholders of record should transfer and surrender their old certificates of stock to the corporation, without any monetary consideration, but only for the purpose of replacing the old stock certificates into new ones. In other words, there is no effective transfer of beneficial ownership over the said shares. Such being the case, the replacement of stock certificates is not subject to the documentary stamp tax prescribed in Section 175 of the Tax Code, as amended." Accordingly, the issuance of new shares of stocks, to replace the previously issued and outstanding shares of stocks of C & P Homes, Inc. pursuant to a decrease in its capital stock is exempt from the payment of documentary stamp tax. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service