Puyat Jacinto & Santos Law Offices

February 6, 2008 BIR RULING [DA-074-08] 24 (C); 98; 176 DA-485-04 Puyat Jacinto & Santos Law Offices 12/F Manilabank Building 6772 Ayala Avenue Makati City Attention: Atty. Virginia B. Viray and Atty. Carmen Clara G. Lesaca Gentlemen : This refers to your letter dated December 13, 2007, requesting on behalf of your client, Margarita D. Mercado, for confirmation of your opinion that the transfer of her shares in Productronica Holdings, Inc. to Jose Alberto D. Dimayuga, as trustor and beneficial owner of the share, is not subject to capital gains tax, donor's tax and documentary stamp tax. It is represented that Jose Alberto G. Dimayuga (JGD) is a Filipino, of legal age and with address at 227 Makiling St., Ayala Alabang Village; that Ma. Margarita D. Mercado (MDM) is a Filipino, of legal age and with address at 60 Celery Drive, Valle Verde V, Pasig City; that on the other hand, Productronica Holdings, Inc. (PHI) is a domestic corporation registered with the Securities and Exchange Commission on April 2002 under SEC Registration No. A200206886; that it is engaged in the business of acquiring and owning, holding, using, managing, developing, selling, assigning, transferring, mortgaging, pledging, exchanging or otherwise disposing of real and personal property of every kind and description among others; that on August 31, 2004, JGD assigned to MDM Fifteen Thousand Five Hundred (15,500) shares of stock in PHI, as evidenced by the Deed of Assignment of Shares; that the shares, covered by Stock Certificate Nos. 003 and 013, are actually held by MDM merely as trustee in trust for the trustor and beneficial owner, JGD, as evidenced by a Declaration of Trust dated August 27, 2004; and that on December 7, 2007, a Deed of Conveyance of Shares of Stock was executed by MDM and JGD without monetary consideration for the purpose of consolidating the title and beneficial ownership over the shares of JGD and terminating the parties' trust agreement except only to documentary stamp tax on certificates under Section 188 of the same Code. cSTDIC In reply, please be informed that under Section 24 (C) of the Tax Code of 1997, a final tax at the rates of 5% and 10% shall be imposed upon the net capital gains realized during the taxable year from the sale, barter, exchange or other disposition of shares of stock in a domestic corporation, except shares sold, or disposed of through the stock exchange. In the instant case, there is no sale, barter or exchange of the 15,500 shares of stock of PHI since JGD is the real owner of the shares of stock involved while MDM acted merely as Trustee. Accordingly, the transfer of the PHI Shares from the Trustee to the Trustor, the real owner therefor, without monetary consideration and by virtue of the Deeds of Conveyance of Shares of Stock is not subject to the capital gains tax. In BIR Ruling No. 31-99, this Office held that the conveyance by the Trustee in favor of the Trustor of the subject properties which the former acquired by virtue of the trust agreement is not to be treated as another transfer separate and distinct from the sale between the original owner and the trustee. The conveyance is merely to be treated as a continuation and confirmation of title in favor of the ultimate, and real beneficiary of the subject properties. Moreover, the conveyance of the said shares of stock is not subject to donor's tax imposed under Section 98 of the Tax Code of 1997, due to lack of donative intent. Furthermore, the said Deeds are not subject to the documentary stamp tax imposed under Section 176 of the Tax Code of 1997, but only to the documentary stamp tax on certificates under Section 188 of the same Code. (BIR Ruling No. 115-94) This will, therefore, serve as authority for the Corporate Secretary to transfer the shares of stock of PHI in the name of JGD. 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. CIHAED Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service