Puyat Jacinto & Santos Law Offices

April 10, 2008 BIR RULING [DA-231-08] 24 (C); 98; 176; DA-525-03 Puyat Jacinto & Santos Law Offices 12/F Manilabank Building 6772 Ayala Avenue Makati City Attention: Atty. Najha Katrina J. Estrella Gentlemen : This refers to your letter dated March 12, 2008, requesting on behalf of your client, Performance Asia Philippines, Inc. (PAPI),for confirmation of your opinion that the transfer of share of stock in PAPI from a shareholder's trustee and nominee to the same shareholder's new trustee and nominee, is not subject to capital gains tax, donor's tax and documentary stamp tax. It is represented that PAPI is a domestic stock corporation, duly organized and existing under Philippine laws and with office address at 12th Floor Chatham House, 116 Valero St.,Salcedo Village, Makati City; that C.P. Wireless, Inc. (CPWI) is a domestic stock corporation, duly organized and existing under Philippine laws and with office address at 23 Arayat St.,Mandaluyong City; that CPWI is the holder of 3,999 shares of PAPI representing 39.99% ownership; that Carlos G. Dominguez is a holder of 1 share of stock of PAPI as trustee of CPWI; that Mr. Dominguez is being replaced by Mr. Jose Alberto D. Javier as the new trustee of CPWI; and that CPWI has instructed Mr. Dominguez to transfer his 1 share to Mr. Javier to qualify as director and new trustee of CPWI. 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. aHSCcE In the instant case, there is no sale, barter or exchange of the 1 share of stock of PAPI since Mr. Dominguez, acting as Trustee of CPWI, is merely transferring his share to Mr. Javier as CPWI's new trustee. Accordingly, the transfer of the PAPI share from the Trustee-Shareholder to Trustor's new Trustee-Shareholder, without monetary consideration and by virtue of the Deed of Assignment is not subject to the capital gains tax since the share of stock is actually owned by CPWI and that Mr. Dominguez and Mr. Javier are mere nominees and/or trustees of CPWI (BIR Ruling No. DA-525-03 dated 22 December 2003). Moreover, the assignment of the said share 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 assignment 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 share of stock of PAPI in the name of Mr. Jose Alberto D. Javier. 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. TDaAHS Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service