BIR Ruling [DA-108-01]

June 5, 2001 BIR RULING [DA-108-01] 24 (D) (1) Bengzon Narciso Cudala-Jimenez Gonzalez & Liwanag SOL Building, 112 Amorsolo Street Legaspi Village Makati City Attention: Atty . Ma . Romela M . Bengzon Gentlemen : This refers to your letter dated January 22, 2001 requesting for a ruling on the tax implication of the transfer by your client, Comprehensive Annuity Plans and Pension Corporation ("CAPP2" for brevity) of shares of stocks thereon to its Trustee, Bank of Commerce (formerly Boston Bank of the Philippines), as administrator of CAPP2's Trust Fund. It is represented that CAPP2 is a domestic corporation organized and existing under and by virtue of Philippine laws, it is primarily engaged in the selling of pension plans, under which the savings of the plan holders are pooled together and invested in profitable placements and productive enterprises in order to build a retirement estate for each individual participant or plan holder. In order to guarantee its undertaking under its pension plan subscribed by the plan holders, a Trust Fund was created by virtue of a Trust Agreement executed on April 30, 1991 between CAPP2 and Bank of Commerce under which the Fund is to be managed and administered by the Bank of Commerce as trustee for the benefit and account of CAPP2. CAPP2 made equity investments in FIL-ESTATE MANAGEMENT INC. ("FEMI") in the form of subscriptions to common stock as evidenced by FEMI Stock Certificate No. 00129 with 45,739 shares. In compliance with the pertinent corporate laws, including rules and regulations of the Securities and Exchange Commission (SEC), CAPP2 decided to transfer its said FEMI shares to its Trustee to form part of the Trust Fund by virtue of a Deed of Assignment dated January 31, 2000. In reply, thereto, please be informed that since there is no actual transfer of ownership over the above-mentioned shares of stock from CAPP2, the Trustor, to Bank of Commerce, the Trustee and administrator of the CAPP2 Trust Fund, the said transfer is not subject to capital gains tax under Section 24(D)(1) of the Tax Code of 1997. Moreover, the Deeds of Trust executed to convey the aforementioned properties to Bank of Commerce, as Trustee, to form part of the Trust Fund is not subject to the documentary stamp tax imposed under Section 176 of the Tax Code of 1997. However, the notarial acknowledgment is subject to the documentary stamp tax of P15.00 under Section 188 of the said Code. 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.) EDMUNDO P. GUEVARA Deputy Commissioner Legal and Inspection Group