ATR KimEng Capital Partners, Inc.

April 2, 2009 BIR RULING [DA-(048) 181-09] Section 122; DA-571-06; DA-501-07 ATR KimEng Capital Partners, Inc. 17/F Tower One & Exchange Plaza Ayala Triangle, Ayala Avenue Makati City Attention: Ms. Nilaida S. Enriquez Treasurer Gentlemen : This refers to your letter dated January 14, 2009 requesting for a ruling on the following issues: 1. The applicable GRT as a non-bank financial intermediary not authorized to perform quasi banking functions; 2. The applicable withholding tax rate to be applied by your clients on fees arising from underwriting services for initial public offers, follow-up offers, and the like. It is represented that ATR KimEng Capital Partners, Inc. with TIN 000-166-719-000 has an Investment House License from the Securities and Exchange Commission and a Trust License from the Bangko Sentral ng Pilipinas; that it is a non-VAT entity registered with the Bureau of Internal Revenue; and that it is subject to gross receipts tax (GRT) as a non-bank financial intermediary under Section 121 of the Tax Code of 1997, as amended by Republic Act No. 9337. TIEHDC In reply, please be informed that under Section 2.3 of Revenue Regulations No. 9-2004, implementing Section 122 of the Tax Code of 1997, Non-Bank Financial Intermediaries is defined as follows: "Sec. 2.3. Non-bank Financial Intermediaries. Shall refer to persons or entities whose principal functions include the lending, investing or placement of funds or evidences of indebtedness or equity deposited with them, acquired by them or otherwise coursed through them, either for their own account or for the account of others. This includes all entities regularly engaged in the lending of funds or purchasing of receivables or other obligations with funds obtained from the public through the issuance, endorsement or acceptance of debt instruments of any kind for their own account, or through the issuance of certificates of assignment or similar instruments with recourse, trust certificates, or of repurchase agreements, whether any of these means of obtaining funds from the public is done on a regular basis or only occasionally." Thus, from the foregoing, ATR KimEng Capital Partners, Inc., is a Non-Bank Financial Intermediary subject to Gross Receipts Tax pursuant to Section 4 of the same Revenue Regulations which provides as quoted: "Section 4. Imposition of Gross Receipts Tax on Other Non-Bank Financial Intermediaries. Gross receipts of other non-bank financial intermediaries (non-bank financial intermediary not performing quasi-banking functions) doing business in the Philippines shall be subject to GRT at rates and on items of income provided hereunder: CcaASE (a) From interest, commissions, discounts and all other items treated as gross income under the Code 5% (b) On interests, commissions and discounts from lending activities as well as income from financial leasing on the basis of remaining maturities of the instruments from which such receipts are derived: Maturity period is five (5) years or less 5% Maturity period is more than five (5) years 1% Secondly, Section 5.116 paragraph 11 of Revenue Regulations No. 2-98 provides for the proper rates ATR KimEng Capital Partners, Inc. clients should withhold arising from underwriting services for initial public offers, follow-up offers, and the like: "(11) Shares of stock sold or exchanged through initial public offering. On the gross selling price or gross value in money derived on every sale, barter, exchange or other disposition through initial public offering of shares of stock in closely held corporations in accordance with the proportion of such shares to the total outstanding shares of stock after the listing in the local stock exchange at the rates herein prescribed: Not over 25% 4% Over 25% but not exceeding 33 1/3% 2% Over 33 1/3% 1%" Accordingly, ATR KimEng Capital Partners, Inc. is subject to the above Gross Receipts Tax rates depending on the maturity period under Section 122 of the Tax Code of 1997, as amended as implemented by Revenue Regulations No. 9-2004, on its interest income from its lending activities, and to the corresponding withholding tax rates ATR KimEng Capital Partners, Inc.'s clients should withhold arising from its underwriting services for initial public offers, follow-up offers, and the like. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be ascertained that the facts are different, then this ruling shall be considered void. acITSD Very truly yours, Commissioner of Internal Revenue By: (SGD.) GREGORIO V. CABANTAC Deputy Commissioner Legal and Inspection Group