Quisumbing Torres

March 11, 2008 BIR RULING [DA-150-08] DA406-07 Quisumbing Torres 12th Floor, Net One Center 26th Street corner 3rd Avenue Crescent Park West Bonifacio Global City Taguig City Attention: Atty. Dennis G. Dimagiba and Atty. Jose Jaime V. Cruz Gentlemen : This refers to your letter dated December 12, 2007 stating that your client, Wm. Wrigley Jr. Company (Wrigley), is a corporation organized and existing under the laws of the State of Delaware, USA with principal office at 410 North Michigan Avenue, Chicago, Illinois, USA; Wrigley is a publicly-held corporation with shares listed and traded through the New York Stock Exchange; that Wrigley is registered to engage primarily in the business of manufacturing and selling chewing gum, confectionery, food products and related products; that Wrigley has ownership (direct or indirect) and ultimate voting control over approximately 60 privately-held subsidiaries organized in several jurisdictions and belonging to the Wrigley Group of Companies; that these entities include the following: Wrigley Philippines, Inc. (WPI), a corporation organized and existing under the laws of the Republic of the Philippines with SEC Registration No. 22819 and registered to engage in the business of manufacturing, selling, trading and dealing in and handling chewing gum, confectionery, gum chicle, food products, and by-products of any of the foregoing; Wrigley International Holding Company (WIHC), a corporation organized and existing under the laws of the State of Illinois, USA with principal business address at 410 North Michigan Avenue, Chicago, Illinois, USA and registered to engage in business as an investment holding company; and Wrigley Overseas Finance B.V. (WOFBV), a corporation organized and existing under the laws of the Netherlands, and registered to engage in the business as an investment holding company; that Wrigley is currently the registered and beneficial owner of effectively 100% of the outstanding capital stock of WPI, consisting of the following shares: CaAIES 119,993 shares of the common stock of WPI; and 1,107,250 shares of the preferred stock of WPI (collectively referred to as the WPI shares) that WIHC is also a direct subsidiary and is wholly-owned by Wrigley; that in turn, WOFBV is directly owned by WIHC and Wrigley Europe B.V., which is another Dutch Company belonging to the Wrigley Group of Companies and owned directly and jointly by Wrigley and WIHC; that on November 1, 2007, Wrigley, WIHC and WOFBV entered into a tripartite Contribution Agreement (Agreement) with the primary objective of reorganizing operations to achieve certain operating and economic efficiencies within the Wrigley Group of Companies, insofar as Wrigley's investments in the WPI shares are concerned; that in the Agreement, Wrigley agreed to contribute its rights, title and interests in the WPI shares to its direct subsidiary, WIHC, as an additional capital contribution to the latter; that immediately after such transaction, WIHC, in turn, agreed to contribute its rights, title and interests in the same WPI shares to WOFBV, similarly as an additional capital contribution to the latter; that as a result of the foregoing back-to-back share contributions, WOFBV will become the new direct owner of the WPI shares; that WOFBV will continue to be directly owned by WIHC (jointly with Wrigley Europe B.V.), while WIHC, in turn, will continue to be a direct subsidiary of Wrigley; that however, beneficial ownership in the WPI shares will remain in the Wrigley Group of Companies, particularly in Wrigley through direct or indirect control of its subsidiaries, WIHC and WOFBV. Based on the foregoing representations, you now request confirmation of your opinion that the above-described contributions of the WPI shares by Wrigley and subsequently by WIHC are not subject to the capital gains tax levied under the Tax Code of 1997 on the sale, exchange or other disposition of shares of stock in a Philippine corporation not traded through the stock exchange; and that the foregoing contributions of the WPI shares, albeit without consideration, are not subject to the donor's tax levied under the said Code. In reply thereto, please be informed that this Office had already occasion to rule on the matter, when it said in BIR Ruling No. DA088-06 dated March 6, 2006, that ". . . the proposed transfer of the TPC shares from TTC to THBV, pursuant to a worldwide corporate reorganization of The Thomson Group of Companies, is not subject to capital gains tax as (1) there is no effective transfer of beneficial ownership of the TPC shares since both Transferor and Transferee belong to The Thomson Group of Companies and (2) the proposed transfer is a mere re-alignment of stockholdings effectively consolidating beneficial and legal ownership of the TPC shares. Since there is no transfer of beneficial ownership, no gain will be realized by TTC and THBV for income tax purposes. LexLib xxx xxx xxx The proposed transfer of the TPC shares will be made primarily for business considerations, i.e., in connection with a worldwide corporate reorganization and to consolidate beneficial and legal ownership into the Transferee. Thus, the proposed transfer to be made without consideration is not subject to donor's tax since there is no donative intent that can be attributed to the Transferor. Furthermore, both the Transferor and the Transferee are subsidiaries and part of The Thomson Group of Companies and there is no transfer of beneficial ownership of the TPC shares. . . . there can be no donative intent on the part of the transferor in a transfer of properties to the member-beneficiaries, considering that a person or entity cannot donate properties the ownership of which belongs to themselves. (BIR Ruling No. DA318-99 dated May 21, 1999) xxx xxx xxx IN VIEW OF THE FOREGOING, this Office hereby confirms your opinion that considering the transfer of WPI shares by Wrigley and subsequently by WIHC pursuant to the contribution agreement among the parties, will not result in the transfer of beneficial ownership in the WPI shares outside the Wrigley Group of Companies, to which Wrigley, WIHC and WOFBV all belong, with Wrigley as the ultimate parent company, is in effect a legitimate corporate reorganization and without consideration is not subject to capital gains tax and donor's tax. However, the transfer of WPI shares from Wrigley and subsequently from WIHC shall be subject to documentary stamp tax imposed under Section 4 of Revenue Regulations No. 13-2004, implementing Section 176 of the Tax Code of 1997. 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. TEIHDa Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service