Puyat Jacinto & Santos Law Offices

April 10, 2008 BIR RULING [DA-230-08] 24 (C); 98; 176; DA-485-04; DA-074-08 Puyat Jacinto & Santos Law Offices 12/F Manilabank Building 6772 Ayala Avenue Makati City Attention: Atty. Arnaldo M. Cario Gentlemen : This refers to your letter dated March 12, 2008, requesting on behalf of your client, Subic Bay Biofuels, Inc. (SBBI), for confirmation of your opinion that the transfer of Reliable Markets Corporation (RMC) of its shares in SBBI to Frontier Capital Holdings, Inc. (FCHI), as trustor and beneficial owner of the shares, is not subject to capital gains tax, donor's tax and documentary stamp tax. It is represented that RMC is a domestic stock corporation, duly organized and existing under Philippine laws and with office address at 12th Floor Manilabank Building, 6772 Ayala Avenue, Makati City; that FCHI is a domestic stock corporation, duly organized and existing under Philippine laws and with office address at Suite 1207 Security Bank Centre, 6776 Ayala Avenue, Makati City; 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 SBBI is a domestic stock corporation, duly organized and existing under Philippine laws and duly registered with the Securities and Exchange Commission on 10 February 2006 bearing SEC registration number CS200601990; that on 10 February 2006, RMC subscribed to Two Hundred Forty Nine Thousand Nine Hundred Ninety Five (249,995) shares of stock in SBBI (the "Shares"), as evidenced by the Certificate of Incorporation issued by SEC; that the shares are actually held in trust by RMC merely as trustee in trust for the trustor and beneficial owner, FCHI, as evidenced by a Declaration of Trust dated February 10, 2006; and that on October 11, 2007, a deed of assignment was executed by RMC and FCHI without monetary consideration for the purpose of consolidating the title and beneficial ownership over the shares of FCHI and terminating the parties' trust agreement except only to documentary stamp tax on certificates under Section 188 of the same Code. 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. cIECTH In the instant case, there is no sale, barter or exchange of the 249,995 shares of stock of SBBI since FCHI is the real owner of the shares of stock involved while RMC acted merely as Trustee. Accordingly, the transfer of the SBBI shares from the Trustee to the Trustor, the real owner thereof, without monetary consideration and by virtue of the Deed of Assignment is not subject to the capital gains tax. In BIR Ruling No. 31-99, this Office held that the assignment 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 assignment 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 assignment 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 Deed is 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 SBBI in the name of FCHI. 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.) JAMES H. ROLDAN Assistant Commissioner Legal Service