BIR Ruling [DA-121-06]

March 16, 2006 BIR RULING [DA-121-06] 28 (B) (5) (c), 98, 196; DA-080-2002 Puyat Jacinto and Santos 12/F Manilabank Bldg. 6772 Ayala Avenue Makati City Attention: Attys. Virginia B. Viray and Divina Gracia Cabildo-Yap Gentlemen : This refers to your letter dated June 22, 2005, as indorsed by the Chief, Legal Division, Revenue Region No. 7, Quezon City, requesting for an opinion relative to the transfer by Universal Vision Corporation (UVC) of its shares in Customer Contact Center, Inc. (C3) to C-Cubed B.V. (C-Cubed for brevity). It appears that UVC is a nonresident limited liability company duly formed and existing under the laws of the British Virgin Islands, with address at Vanterpool Plaza, 2/F Wickhams Cay 1 Road Town Tortola, British Virgin Islands. On the other hand, C-Cubed 1 is a nonresident corporation organized and existing under the laws of Netherlands, with office address at Ringbaan Oost 8-14 at 5013 CA Tilburg, Netherlands. C3 is a domestic corporation registered with the Securities and Exchange Commission (SEC) on May 12, 2000 under SEC Registration No. A200006651. It is engaged in the business of providing customer contact service, acting as sole or sub-agent or representative of any such client wherever it be situated, providing collection, marketing and promotions facilities and providing consultancy, advisory, management and staffing services, among others. On July 30, 2003, UVC purchased from Benpres Holdings Corporation ten million (10,000.000) shares of stock in C3 pursuant to a stock purchase agreement and evidenced by a Deed of Sale of Shares of Stock. Nine million nine hundred ninety nine thousand nine hunched ninety three (9,999,993) 2 of the purchased C3 shares covered by Stock Certificate No. 020 were actually held by UVC as trustee in trust for the trustor and beneficial owner who is C-Cubed, as evidenced by a Declaration of Trust With Power of Attorney dated July 30, 2003. DHcESI On June 21, 2005, a Deed of Conveyance of Shares of Stock was executed by UVC and C-Cubed for the purpose of consolidating the title and beneficial ownership over the 9,999.993 shares of C3 to C-Cubed, and thereby terminating the parties' trust agreement. Considering that a ruling on the non-taxability of the conveyance of shares from the trustee to the trustor must first be settled before the issuance of a Certificate Authorizing Registration (CAR), it is but proper to confirm the following: 1. The conveyance by UVC, as trustee of its shares in C3 to C-Cubed, as trustor and beneficial owner of the shares is not subject to capital gains tax under Section 28(B)(5) of the Tax Code of 1997 nor to the donor's tax under Section 98 of the same Tax Code. 2. The conveyance by UVC, as trustee of its shares in C3 to C-Cubed, as trustor and beneficial owner of the shares is not subject to documentary stamp tax under Sec. 175 of the Tax Code of 1997, as amended by Republic Act (RA) No. 9243. In reply, please be informed that since the transfer of the shares is without monetary consideration, the same is not subject to the capital gains tax imposed under Section 28(B)(5)(c) of the Tax Code of 1997. (BIR Ruling No. DA-080-2002 dated April 29, 2002) In BIR Ruling No. DA-080-02 dated April 29, 2002, this Office has ruled that the transfer of shares from the trustee to trustor without monetary consideration and by virtue of a Deed of Trust executed between them is not subject to capital gains tax. Likewise, the conveyance of the shares from the trustee to the trustor without consideration is not taxable under Section 185 of the Revised Documentary Stamp Tax Regulations. Thus, the Deed of Conveyance of Shares of Stock executed by UVC to C-Cubed and was made without monetary consideration is not subject to the documentary stamp tax imposed under Section 175 of the 1997 Tax Code, as amended by RA 9243. However, the notarial acknowledgement to the said deed is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the Tax Code of 1997. The transfer of the above-mentioned shares is exempt from the donor's tax imposed under Section 98 of the same Code due to lack of donative intent on the part of the trustee. AEDISC 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 as null and void. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service Footnotes 1. Formerly named "Brabantse Verf-En Glasindustrie Van Erp Van Gorcom B.V." 2. The other seven shares (10M less 9,999,993) were held by seven individuals (1 share each) as qualifying shares to enable them to sit as Directors of C3. They were likewise nominees of C-Cubed. Two of the individuals subsequently transferred their respective shares to UVC upon instructions of C-Cubed.