Laya Mananghaya & Co.

May 18, 2007 BIR RULING [DA-308-07] DA 209-05 Laya Mananghaya & Co. 22/F Philamlife Tower 8767 Paseo de Roxas Makati City Attention: Atty. Francisco G. Tagao Head, Tax and Corporate Services and Atty. Manuel P. Salvador III Director, Tax and Corporate Services Gentlemen : This refers to your letter dated November 23, 2006 stating that Cemex Manila Investments B.V. (Cemex Manila) is a non-resident foreign corporation organized and existing under the laws of the Netherlands with principal office address at Amsteldjik 166, 1079 LH Amsterdam, Netherlands; that among the purposes for which Cemex Manila was established is "to incorporate, to participate in any way whatsoever, to acquire interests in by other means, to manage, supervise, to operate and to promote enterprises, businesses and companies, whatever their nature"; that moreover, Cemex Manila is not registered either as a corporation or a partnership licensed to do business in the Philippines as per certification issued by the Securities and Exchange Commission (SEC) dated May 16, 2006; that aside from owning 30% of Solid Cement Corporation (SCC), Cemex Manila also owns 100% of Cemex Strategic Philippines, Inc. (CSPI) shares of stock and 30% of Island Quarry and Aggregates Corporation (IQAC) shares of stock; that SCC, CSPI and IQAC are corporations duly organized and existing under the laws of the Philippines; that SCC is engaged in the manufacture, development, processing, exploiting, purchase and sale of cement and/or other products derived therefrom while CSPI was incorporated primarily to provide and render management, supervisory, technical, and advisory and consultancy services to corporations and individuals, with respect to production, manufacturing, marketing, distribution of cement and other related matters; that IQAC is engaged mainly in quarry of mineral deposits; that on the other hand, Cemex Asia B.V. (Cemex Asia) is a non-resident foreign corporation having its registered office in Amsterdam and its business office at Amsteldjik 166, 1079 LH Amsterdam; that it is a private company with limited liability which is wholly owned by Cemex Espana S.A., a corporation duly existing and organized under the laws of Spain; that pursuant to the regional corporate reorganization, a Deed of Merger was entered into by Cemex Manila, Cemex Indonesia Investments B.V. (Cemex Indonesia), Pacific Assets N.V. (Pacific) and Cemex Asia and said merger took effect on December 30, 2005 with Cemex Asia as the sole surviving entity; and that the merging corporations, Cemex Manila, Cemex Indonesia, Pacific and Cemex Asia have the same shareholder, Cemex Espana, S.A. Based on the foregoing representations, you now request for confirmation of your opinion (1) Any gains on the transfer of shares held by Cemex Manila in SCC, CSPI and IQAC to Cemex Asia pursuant to the merger effected in and under the laws of the Netherlands is not taxable in the Philippines and thus not subject to the capital gains tax under Section 28 (B) (5) (c) of the Tax Code of 1997, as amended; and (2) The transfer of shares is subject to documentary stamp tax under Section 175 of the Tax Code of 1997, as amended by R.A. No. 9243 at the rate of P0.75 for every P200.00, or a fractional part thereof, of the par value of the shares transferred. In reply thereto, please be informed that your opinion is hereby confirmed as follows 1. In BIR Ruling No. DA209-05 dated April 27, 2005 , this Office had already occasion to rule on the matter, as follows "The transfer of the shares in Taian Subic from Taian Taiwan to TECO is a legal consequence of the merger of Taian Taiwan with TECO, with the latter as the surviving corporation. A merger does not involve a sale, exchange or disposition of shares since there is no transfer of beneficial ownership over the shares. In a merger, the surviving corporation succeeds to the rights and liabilities of the absorbed corporation and merely carries on the identity of the latter. Hence, no taxable transaction actually took place in the Philippines. (BIR Ruling No. UN397-95 dated October 14, 1995) Accordingly, the transfer of the Taian Taiwan to TECO pursuant to a merger effected in accordance with the laws of Taiwan is not subject to the 5%/10% capital gains tax imposed under Section 28(B)(5)(c) of the Tax Code of 1997." Accordingly, the gains, if any, derived by Cemex Manila in the transfer of its shares in SCC, IQAC and CSPI to Cemex Asia as a result of the merger effected abroad is not subject to the capital gains tax prescribed in Section 28 (B) (5) (c) of the Tax Code of 1997. 2. However, notwithstanding the foregoing exemption, the transfer of shares held by Cemex Manila in SCC, CSPI and IQAC to Cemex Asia pursuant to the said merger effected abroad is nevertheless subject to the documentary stamp tax imposed under Section 175 of the Tax Code of 1997, as amended by R.A. No. 9243, at the rate of P0.75 on each P200.00, or a fractional part thereof, of the par value of the shares. CSAaDE 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, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service