BIR Ruling [DA-084-97]

March 3, 1997 BIR RULING [DA-084-97] Siguion Reyna, Montecillo & Ongsiako Law Offices 8755 Paseo de Roxas Philcom Bldg., Makati City Attention: Atty . Jose Lis C . Leagogo Gentlemen : This refers to your letter dated February 12, 1997 stating that in BIR Ruling No. S34-407-96 dated September 9, 1996 as well as in BIR Ruling No. 012-97 dated February 4, 1997 your client, Active Group, Inc. (AGI) disclosed that it originally increased its authorized capital stock to P=5,700,000.00 which increase was approved by the Securities and Exchange Commission (SEC); that in connection with the said increase, Antonio A. Turalba, Ma. Cristina V. Turalba, Antonio V. Turalba, Jr., Antonella V. Turalba and Anjeanette V. Turalba (Turalba Family) exchanged their shares in Active Realty and Development Corporation (ARDC), Active Construction, Inc. (ACI) and Active Property Holdings Corporation (APHC) for 3,000,000,000 shares in AGI; that the SEC in accordance with its standard practice, required that the AGI shares of stock to be received by the Turalba Family be held in escrow by the SEC and shall be released only after proof of the transfer of the registration of the shares being transferred in the name of the transferee corporation is submitted to the SEC within thirty (30) days from the date of the approval of the application; that before the stock certificates in the names of the Turalba Family can actually be issued and deposited in escrow with the SEC, it was decided that in order that the net income of ARDC, ACI and APHC can be fully reflected in the audited financial statements of said companies and in the consolidated financial statements of AGI, the number of AGI shares to be issued to the Turalba Family be recomputed at book value of the ARDC, ACI and APHC shares without taking into consideration the appraisal increment of the properties of said companies; that as a consequence of said change in valuation, the number of AGI shares to be received by the Turalba Family in the exchange was reduced to 277,385,117 shares instead of 3,000,000,000 shares; that AGI's authorized capital stock was correspondingly reduced from P5,700,000,000.00 to P1,100,000,000.00; and that the reduction in authorized capital stock was approved by the SEC and the corresponding documentary stamp tax on the 277,385,117 AGI shares was accordingly paid. cdtech In connection therewith, you are requesting confirmation of your opinion that your client, AGI need not pay anymore the documentary stamp tax on the 3,000,000,000 shares because as held in BIR Ruling No. 012-97 dated February 4, 1997 the documentary stamp tax thereon is not accrue; that even before the certificate of stocks for the 3,000,000,000 shares can be issued and deposited in escrow with the SEC, the 3,000,000,000 shares to be issued to the Turalba Family was reduced to 277,385,117 shares; and that the reduction was approved by the SEC and the corresponding documentary stamp tax on the 277,385,117 shares was accordingly paid. In reply thereto, please be informed that your opinion is hereby confirmed. Considering that even before the certificates of stocks in the names of the Turalba Family can actually be issued and deposited in escrow with the SEC, AGI's authorized capital stock was reduced from P5,700,000,000.00 to P1,100,000,000 and correspondingly the number of AGI shares to be received by the Turalba Family in the aforementioned exchange of their shares in ARDC, ACI and APHC for shares of stock of AGI was likewise reduced from 3,000,000,000 to 277,385,117 shares which reduction was approved by the SEC, AGI shall be subject to the documentary stamp on the original issue of the certificates of stocks corresponding to the 277,385,117 shares of stock which it has already paid and not on the 3,000,000,000 shares pursuant to Section 175 of the Tax Code, as amended. (BIR Ruling No. 012-97 dated February 4, 1997) cdta Very truly yours, ALICIA L. TOMACRUZ Head Revenue Executive Assistant (Legal Service)